December 6, 2023

DealBook: Zillow Soars 79% in Its Debut on Nasdaq

Spencer Rascoff, center, the chief of Zillow, and his colleagues celebrated its initial public offering on Wednesday at the Nasdaq.Zef Nikolla/NasdaqSpencer Rascoff, center, the chief of Zillow, and his colleagues celebrated its initial public offering at the Nasdaq.

8:46 p.m. | Updated

Once again, investors have caught Internet fever.

Shares of Zillow, the online real estate information company, gained nearly 79 percent in its debut on the Nasdaq stock market on Wednesday, closing at $35.77. The company, which set its initial public offering price at $20, soared as high as $60 when trading began.

The first-day gains in Zillow echoed those of the social network LinkedIn, which more than doubled from its offering price in May, and Yandex, known as the Google of Russia, which jumped 55 percent a few days later.

Investors are awaiting initial public offerings from Groupon, the social buying site; Zynga, the creator of the online game FarmVille; and ultimately Facebook.

Investors’ enthusiasm for Internet stocks this year has raised questions about whether this boom could be repeat of the 1990s technology bubble, setting investors up for a fall. In one instance, Renren, a Chinese social networking site, jumped as much as 71 percent on its first day on the New York Stock Exchange in May, but its shares are now trading well below their offering price.

And in a sign of nervousness, JPMorgan Chase, one of the underwriters of LinkedIn’s initial public offering, downgraded its rating on the company’s shares on Monday, calling them overvalued. Despite a retreat after the downgrade, LinkedIn still trades at more than twice its offering price of $45.

Investors have not been totally indiscriminate in their quest for Internet stocks. In June, for instance, shares of Pandora Media, a popular but unprofitable online music service, gained only 8.9 percent in their debut and later fell below their offering price before recovering.

Zillow did receive special treatment in its market debut, as it entered the rarefied club of publicly traded corporations with single-letter ticker symbols.

Zillow, which trades as Z, is the first single-letter stock to trade on the Nasdaq stock market. It joins such blue-chip corporations as the Ford Motor Company (F), Visa (V), and Citigroup (C), all of which trade on the New York Stock Exchange.

Before Zillow, the last company to trade under the letter Z was the now-defunct Woolworth’s department store chain.

Bob McCooey, Nasdaq’s head of listings, said on Wednesday that getting Zillow a single-letter ticker symbol required lobbying the New York Stock Exchange, which had put it on a so-called perpetual list of symbols it had reserved for future listings.

“For Zillow, it’s really about their branding,” Mr. McCooey said. “They felt like this was going to make them unique.”

Other companies seeking one-letter ticker symbols should hurry: I, J, Q, U and W are still available, though all five are on the New York Stock Exchange’s reserved list.

“They don’t share very much with us,” Mr. McCooey said.

Like other Internet companies, Zillow had outsize expectations about its initial public offering. Originally, the company set its price range at $12 to $14 a share, later increasing it to $16 to $18 before finally setting it at $20. The company raised more than $69.2 million from the offering, valuing it at as much as $550 million. With Wednesday’s 78.9 percent increase, Zillow has a market value of nearly $1 billion.

But as with peers, Zillow is still struggling to be profitable. The company reported a loss of $6.8 million in 2010, according to its recent regulatory filing. Still, the company is growing. Zillow’s revenue increased 74 percent, to $30.5 million. This year, Zillow entered into a partnership with Yahoo Real Estate and acquired Postlets, a real estate listing service.

Citigroup was the underwriter on Zillow’s initial public offering.

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