NEW YORK — Investors set aside housing market doldrums and rushed to grab shares of the real estate website Zillow on Wednesday, valuing the company at as much as $1.6 billion.
Zillow Inc., which has never made a profit, is another beneficiary of strong investor demand for the latest crop of
Internet stocks. Zillow’s shares tripled in their trading debut on the Nasdaq stock market. Zillow had set a price of $20 for its stock late Tuesday. The shares rose as high as $60 before settling back to $35.77 at the close of trading, valuing the Seattle-based company at about $1 billion.
The weak housing market didn’t hurt Zillow’s IPO. Figures released Wednesday show that Americans are buying homes at the weakest pace in 14 years.
Zillow’s initial public offering follows filings by high-profile Internet companies ranging from daily deals site Groupon Inc. and the professional networking service LinkedIn Corp. Though these Internet-based companies are generating a lot of IPO euphoria, the attention they receive on their initial day of trading has not guaranteed success. Pandora Inc., the online radio service, has seen it shares fluctuate wildly.
“Investors are very keyed up on business models that integrate the Internet into their main platform and have mobile apps,” said David Menlow, the founder and president of research company IPO financial.
Founded in 2004, Zillow provides online listings for more than 100 million homes that are either for sale or for rent. A feature called “Zestimate” helps estimate property values, so that people can see how much homes in their neighborhood–or desired neighborhood– are worth. Zillow calculates the figure by taking available data, most of it public, and entering it into a formula that takes into account hundreds of such details as how many bathrooms or bedrooms a home has or where it is located.
Zillow makes money from advertising, by real estate professionals as well as mortgage companies and brands such as phone or insurance companies. Spencer Rascoff, Zillow’s 35-year-old CEO, said the volatile housing market has actually helped the company grow its ad revenue.