market folly

We're posting up notes from the 2014 Value Investing Congress in New York. Next up is Andrew Left of Citron Research who presented a short of "Zulia", or the combined Zillow / Trulia entity.


Andrew Left's Value Investing Congress Presentation

Shortselling in general: "I keep Xanax in business"
Shortselling in general: two types, when you need something to change vs. when you need things to stay the same (time on your side). Z is in the latter camp. 

Big disconnect between the reality of the residential real estate market (people driven; agents don't differentiate b/n various listing services) vs. the Wall Street hype. 

Business model is providing commodity information (listings) that they do not own and selling the advertising space next to it to agents. Paying agents also block other agents from being displayed on the side of the paying agent's listing. 65% of revenue is agents paying, 25% is display ads, 10% mortgage-related. Agents don't like the business model at all. 

The fundamental problem with Zulia is that the total addressable market ("TAM") is considerably smaller than commonly believed. 

Based on Citron research and certain disclosures, about 40% of the inventory is unavailable for sale. 

Zillow's low-value  "deals" with Douglas Elliman and ReMax are known but they also appear to have special terms with larger regional firms and Keller Williams.  Deals indicative that Z provide little to no value to its customers. 

These corporate deals make the full-price clients very upset; also Z has been reducing the number of protected listings a paying agent might have. 

Price target $22.50 based on comps, $42 based on a stable leadgen EBITDA business. 


Q&A: Compared to the Australian counterparts, Z has no real IP.

Q&A: Long idea BBRY. Internet of things play/secure mobile data transmission. CEO superstar. Handsets no longer a deciding factor. IBM/Apple partnership to enter space validates BBRY's business.


Be sure to check out the rest of the Value Investing Congress presentations here.