CoStar Faces Activist Pressure from Third Point and DE Shaw Over Homes.com Strategy
CoStar Group, the dominant player in commercial real estate data, is embroiled in a proxy battle with activist hedge funds Third Point and DE Shaw, centered around the performance and future of its residential listings site, Homes.com. The conflict highlights a strategic divergence regarding the company’s expansion into the competitive residential market.
Activist Funds Push for Board Changes and Strategic Shift
Third Point, led by Daniel Loeb, and DE Shaw have publicly voiced concerns over CoStar founder and CEO Andy Florance’s significant investment in Homes.com, which has yet to achieve profitability. Both firms are seeking to overhaul CoStar’s board of directors, advocating for a refocus on the company’s core commercial real estate business. They have suggested a potential divestment or shutdown of Homes.com, arguing it is a drain on resources and distracting from more profitable ventures. Reuters and Yahoo Finance reported on these developments.
Baillie Gifford Backs CoStar’s Strategy
Despite the activist pressure, CoStar has secured support from Baillie Gifford, its seventh-largest shareholder. The UK-based fund manager believes CoStar has a proven track record of successful reinvestment and views Homes.com as a key growth driver. Kirsty Gibson, an investment manager at Baillie Gifford, pointed to the potential for Homes.com to replicate the success of CoStar’s other platforms, Apartments.com and LoopNet. Financial Times detailed Baillie Gifford’s backing of CoStar.
Homes.com: A Contentious Investment
Homes.com, acquired in 2020, has generated $90 million in annual revenue but is not expected to become profitable until 2029. Activist funds criticize the project as “ill-conceived and hopelessly executed,” alleging that Florance has devoted disproportionate attention and resources to it. Third Point and DE Shaw argue that these resources would be better allocated to strengthening CoStar’s core commercial real estate data business. Yahoo Finance provides further details on the funds’ criticisms.
Potential for Broader Conflict
The activist campaigns raise the possibility of a broader challenge to Florance’s leadership. Similar activist battles involving founders who remain CEOs, such as those targeting Jack Dorsey at Twitter and Marc Benioff at Salesforce, have resulted in significant strategic changes or even executive departures. The board nomination window opens in mid-March, setting the stage for a contentious proxy fight.
Shareholder Landscape
As of February 15, 2026, Vanguard Group and BlackRock collectively own 24.5% of CoStar’s shares, making them the company’s largest shareholders. Baillie Gifford’s support is significant, but the outcome of the proxy fight will likely depend on the decisions of these large, passive fund managers.