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Two Wrongs Make A Right? Zillow, Trulia Soar On Incomeless Acquisition Plan

Tyler Durden's picture




 

Somehow this makes perfect sense: Zillow's stock is up over 22% on news that it will acquire rival real estate company Trulia for $2 billion. Trulia is up 32%, which is about half in absolute terms of the $1 billion Zillow's market cap has grown by in the past few moments to $6 billion. Imagine if it had paid even more for Trulia? And the piece de resistance: Neither company is currently profitable on an annual basis - the combined net income of the two companies is... zero. Two wrongs do not make a right, or rather didn't. And then the new normal came around... 

Wait, we know: Synergies (or at least infinite NOLs).

 


 

Upon announcing a $2bn acquisition of a money-losing competitor, Zillow "investors" added $1 Billion in market cap to the company... yeah yeah synergies

 

*  *  *

Nope, no bubble here at all...

 

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Thu, 07/24/2014 - 14:34 | 4999558 Argos
Argos's picture

I REALLY need to start a company NOW.  I don't have a business plan, but it looks like that's not needed anymore.

Thu, 07/24/2014 - 14:41 | 4999603 RevRex
RevRex's picture

Both of those sites suck if you are looking for real estate.

Thu, 07/24/2014 - 14:42 | 4999609 wallstreetapost...
wallstreetaposteriori's picture

Wash, rinse, and repeat with absurb market valuations..

Thu, 07/24/2014 - 14:48 | 4999655 0b1knob
0b1knob's picture

Three left turns do however equal one right turn.   Very useful trick sometimes....

Thu, 07/24/2014 - 14:57 | 4999724 max2205
max2205's picture

2 co s that have no PE one 5 B market cap the other 2 B.

5 B buys the other for 2 b. Both go up 30%

Wtf. Makes perfect cents

Thu, 07/24/2014 - 14:59 | 4999738 Pool Shark
Pool Shark's picture

 

 

Probably trading on inside information; like they're about to go global with a campaign based on Sock Puppets...

 

Thu, 07/24/2014 - 15:43 | 5000029 eatthebanksters
eatthebanksters's picture

RevRex, you are so right on!

Thu, 07/24/2014 - 15:57 | 5000123 SumTing Wong
SumTing Wong's picture

Who else wants to short the hell out of all this shit? 

Who else is afraid that the Fed will keep printing the hell out of money so that this makes sense? (And I've got a whole brick of Zim$100T notes to help pay for the acquisition.)

Thu, 07/24/2014 - 17:14 | 5000495 Stackers
Stackers's picture

Next up: Pandora to buy Sirius-XM

Thu, 07/24/2014 - 15:13 | 4999835 PT
PT's picture

But you only profit when you sell, right?  Or did they sell some puts?  Any other methods?

Thu, 07/24/2014 - 15:36 | 4999983 RaceToTheBottom
RaceToTheBottom's picture

BYOM

Bring your own Muppets

Thu, 07/24/2014 - 15:19 | 4999859 Freddie
Freddie's picture

Zillow's data is crap.  I sent them an email about a huge data error.  They said they would fix it a week ago.  Total retards.  I am not a realtor.

Thu, 07/24/2014 - 15:21 | 4999873 thamnosma
thamnosma's picture

Are there any good on-line real estate websites?   Doesn't seem so.  "Boots on the ground" sort of thing.

Thu, 07/24/2014 - 14:41 | 4999605 tenpanhandle
tenpanhandle's picture

I was thinking the same.  All you need is a stupid sounding name and you're halfway there.

Thu, 07/24/2014 - 14:42 | 4999610 AlaricBalth
AlaricBalth's picture

Are Trulia and Zillow based in Belize City?? Their shares sure trade like it. 

Thu, 07/24/2014 - 15:22 | 4999874 Freddie
Freddie's picture

Zillow is a high frequency darling.

Thu, 07/24/2014 - 15:01 | 4999613 Pool Shark
Pool Shark's picture

 

 

Two guys decide to go into business selling watermelons. They buy a pickup truck and purchase watermelons for $2 each from a farmer, then drive into town where they sell them for $2 each.

After several roundtrips to purchase and sell watermelons, one of the guys says to the other: "Hey, we're not making any money."

The other guy says: "Yeah, I think we need a bigger truck."

 [P.S.: this was a joke I first heard 40 years ago. Who would have guessed it would actually become reality...]

 

Thu, 07/24/2014 - 18:38 | 5001075 eatthebanksters
eatthebanksters's picture

Awesome!  I'll be looking for a cheap, hardly used truck, soon!

Thu, 07/24/2014 - 14:44 | 4999627 Dr. Richard Head
Dr. Richard Head's picture

I am part owner of a company that has over 1,500 active clients (no one client holds more than 4% of our business) that has been in business for over 20 years.  We have a profit margin over 25% and have been growing in the double digits for the past 7 years.  I guess we would be a penny stock, if we were to IPO, based on this backwards nonsense called a stock market. 

Thu, 07/24/2014 - 14:52 | 4999658 AlaricBalth
AlaricBalth's picture

Doc. Name it AmazonFaceTweeter, Inc. and you are assured to achieve a market cap of at least $25,000,000,000.00.

 

Thu, 07/24/2014 - 17:35 | 5000649 Nick Jihad
Nick Jihad's picture

No, just wait till some hot internet startup goes IPO, and launch your IPO at the same time, with a very similar ticker symbol.

Thu, 07/24/2014 - 14:46 | 4999639 tarsubil
tarsubil's picture

Wolf Cola is a strong buy. They haven't started production yet but word is it is better than Coke.

Thu, 07/24/2014 - 14:53 | 4999700 666
666's picture

"I REALLY need to start a company NOW."

I've got you beat: I'm in the process of creating one right now! I'm going to call it CYNK.

Oh, wait...

Thu, 07/24/2014 - 15:01 | 4999750 Mike Ochisbent
Mike Ochisbent's picture

Wow. It looks like dinosaurs mating -- again.

Thu, 07/24/2014 - 15:32 | 4999936 midtowng
midtowng's picture

I'll join you!

I have no ideas at all, but it appears that two people not having a plan is worth more than one person not having a plan.

We'll get rich!

Thu, 07/24/2014 - 16:30 | 5000277 AcidRastaHead
AcidRastaHead's picture
Trulia and Zillow insiders sold shares before merger report

http://www.cnbc.com/id/101865234

Thu, 07/24/2014 - 14:35 | 4999559 taraxias
taraxias's picture

Fuck man, someone wake me up from this nighmare.

Thu, 07/24/2014 - 14:39 | 4999591 tenpanhandle
tenpanhandle's picture

Sorry to say "you are awake". 

Thu, 07/24/2014 - 14:47 | 4999656 tarsubil
tarsubil's picture

Nightmare? Why, you're soaking in it.

Thu, 07/24/2014 - 15:05 | 4999787 orangegeek
orangegeek's picture

INSIDIOUS!!!!!!!!!!!!!!!!

Thu, 07/24/2014 - 14:35 | 4999564 toddf
toddf's picture

All noise.

Thu, 07/24/2014 - 14:35 | 4999569 firstdivision
firstdivision's picture

Buy bitches, just buy!

Thu, 07/24/2014 - 14:35 | 4999573 ejmoosa
ejmoosa's picture

Makes me wonder if both of these are just not federal government fronts to publish propaganda that shows the housing markets are improving....

Thu, 07/24/2014 - 14:42 | 4999607 curbyourrisk
curbyourrisk's picture

Ding Ding Ding....

 

we have a winner.

Thu, 07/24/2014 - 14:39 | 4999597 One eyed man
One eyed man's picture

Zillow's price estimates make no sense. On my street it shows a 35% price difference between two houses of the same type and construction, lot size, etc. same side of the street, just two houses apart.

Thu, 07/24/2014 - 14:45 | 4999636 Dr. Richard Head
Dr. Richard Head's picture

My gramama always said it's not what you know, but who you know that matters. 

Thu, 07/24/2014 - 15:44 | 5000032 AlphaBetaCFA
AlphaBetaCFA's picture

Zillow simply pulls assessed values of homes from the county assessors and calculates the implied market value (x3 in my county). If you are aggressive and successful in challenging your annual assessment the Zillow market value estimate for you home is less than the yahoo next door who simply sends in his tax check.

Thu, 07/24/2014 - 14:43 | 4999618 DerAdler
DerAdler's picture

Who's auditing these companies? This has money laundering all over it. What do people think the banksters are doing with trillion$ of newly-minted cash?

Thu, 07/24/2014 - 14:43 | 4999621 SILVERGEDDON
SILVERGEDDON's picture

But wait, there's more. Real Networks just announced that they were gonna buy out both Trullia and Zillow, and fold them into the parent company with killer apps about to be developed. 

The new entity will now be known as.............................. INFOSPACE !!!!!!

The more things change, the more they remain the same.

Lap it up, sheeple, lap it up.  

Thu, 07/24/2014 - 14:43 | 4999622 TN Jed
TN Jed's picture

My wife has been saving so much at all these sales that I need a second job!

Thu, 07/24/2014 - 14:44 | 4999631 astoriajoe
astoriajoe's picture

they'll make it up in volume I'm sure.

Thu, 07/24/2014 - 14:46 | 4999640 nosoeawe
nosoeawe's picture

according to common core curriculum this makes perfect sense! 2+2 = whatever the big eared jihadist in chief says it is

Thu, 07/24/2014 - 14:47 | 4999663 ShrNfr
ShrNfr's picture

And war is peace and less is more. It is only fair.

Thu, 07/24/2014 - 14:47 | 4999654 ShrNfr
ShrNfr's picture

One word, "Eyeballs".

Thu, 07/24/2014 - 14:54 | 4999707 Joebloinvestor
Joebloinvestor's picture

CYNK baby.

Thu, 07/24/2014 - 15:00 | 4999747 Big Ben
Big Ben's picture

"Synergies" is a euphemism for firing all the employees of the newly acquired company.

Where did Zillow get the $2 billion, considering that it currently has no earnings? Or is this a stock deal? No worries about earnings dilution if there are none.

Thu, 07/24/2014 - 17:43 | 5000717 Nick Jihad
Nick Jihad's picture

Well, yeah. This is what you call free-market discipline - supply being brought into balance with demand, and resources that were being wasted, being redeployed to more productive uses.  Quitchyerbitchin.

Thu, 07/24/2014 - 15:03 | 4999766 mastersnark
mastersnark's picture

Do you think they could turn around their companies by lowering their product's price down from "free?"

Thu, 07/24/2014 - 15:06 | 4999799 juggalo1
juggalo1's picture

What's their product?

Thu, 07/24/2014 - 15:11 | 4999824 mastersnark
mastersnark's picture

A website chock full of information they not only paid for, but then they paid to have it manipulated into pretty maps and icons.

Thu, 07/24/2014 - 15:05 | 4999781 Straw Dog
Straw Dog's picture

Beautiful is the only word I can think of to describe this transaction and the underlying fundamentals.

Thu, 07/24/2014 - 15:05 | 4999791 juggalo1
juggalo1's picture

I'm not sure I agree with you all about how bad these companies are.  I agree at a 5B pricetag and 197M in sales it's tough to justify, but until recently zillow was growing really rapidly.  The real estate market is ripe for disintermediation, and these sites could be a valuable advertising and market research niche.  There's a lot of money in home transactions and financing, and despite what critics say, I found them very useful when I was house-hunting.  I prefer zillow to remax.

Thu, 07/24/2014 - 15:40 | 5000017 Squid Viscous
Squid Viscous's picture

How much did you pay Zillow for their valuable service?... let me guess, zero... but your eyballs on the site were priceless, even though you probably didn't even click one of their banner ads...lol

Thu, 07/24/2014 - 15:23 | 4999881 thamnosma
thamnosma's picture

Those websites are worth billions? Neither make a dime?  Please, just shoot me.

Thu, 07/24/2014 - 15:53 | 5000099 Ban KKiller
Ban KKiller's picture

Come to NM and say you are homeless. Cops will be happy to help you suicide. 

Thu, 07/24/2014 - 15:35 | 4999966 Randy Goodnight
Randy Goodnight's picture

Let the layoffs begin!

Thu, 07/24/2014 - 15:36 | 4999975 Squid Viscous
Squid Viscous's picture

there are so many barriers to entry in this business, better to build a moat like AMZN even if it means losing money for 20 years...

/sarc

Thu, 07/24/2014 - 15:45 | 5000034 pitterrier
pitterrier's picture

This news is nothing.  I sold my dog for $4 billion this morning.  The best part, I refused the all cash deal and took 4 $1 billion cats instead.

Thu, 07/24/2014 - 15:49 | 5000072 TabakLover
TabakLover's picture

Is it just me..........or does it feel like the floor is about to drop out of this horse's ass of a market.

Thu, 07/24/2014 - 15:50 | 5000073 TabakLover
TabakLover's picture

Is it just me..........or does it feel like the floor is about to drop out of this horse's ass of a market.

Thu, 07/24/2014 - 16:05 | 5000165 gcjohns1971
gcjohns1971's picture

Gaining market share by means of adding zeros together:

BRILLIANT!

This is a brilliant way to absorb more printed money, thus more value from the economy and the profitable businesses that compose it.

If they subsequently run away with the cash, they won't even need a business to support any of this.

I predict big bonuses.

Thu, 07/24/2014 - 16:29 | 5000270 LeftCoastRefugee
LeftCoastRefugee's picture

Each of these sites sell zip code territories to agents for leads. Are they now going to combine and reduce that revenue via overlapping coverage? or double the price? Idiotic.

Thu, 07/24/2014 - 17:36 | 5000655 Salsipuedes
Salsipuedes's picture

Zillow is like the Neilson Ratings. Limiting, misleading and manipulable all at the same time! What's not to love?

Thu, 07/24/2014 - 22:28 | 5002021 exartizo
exartizo's picture

...here is how screwed up US equity markets are:

On a day when a company that does not make a profit and has no real product or inventory (Zillow or Trulia, pick one?) no real tangible revenue sources, and no ability to generate them, and are together unprofitable companies increase in value by 30%+

....a junior gold mining company named Seabridge Gold (SA), though unprofitable,  however backed by hard assets of found tangible gold and proven gold holdings, has no debt and does not hedge,  drops by 4.17%.

America's investment priorities are sooooo screwed up.

ya just can't make this stuff up.

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