I just received a short report from Citron Research (another financially uber-astute easyDNS client ) which outlines a scathing short thesis for Web 2.0 real estate darling Zillow (Nasdaq: Z).
After successfully predicting short side windfalls for Zynga, Groupon and yes, even Facebook but never getting around to actually shorting any of them, I have to admit that I am tempted. One thing that does give me pause however is that Zillow is already heavily shorted with a short interest at an astounding 45% of the float. The Citron Research report acknowledges this:
Citron acknowledges that Zillow is a high short interest stock — that being for a reason. This purpose of this article is not to cause a sudden drop in stock price. Rather we just want to be on the same side of the counter as management, the people who know best — we are net sellers of the stock. In time, sooner than later, the stock will unwind and will head down toward a realistic multiple. We think that level is in the teens and ultimately the single digits.
The report goes on to highlight that 15 top executives, managers and directors at Zillow have made over $108 million in insider stock sales, while the company itself (after repeatedly stating on their conference call that they were not teeing up for a follow-on offering) raised another 125 million from a follow-on shelf offering (which exceeds their actual annual revenues).
Another overvalued, overhyped, non-compelling business only this time, it isn’t already in the toilet, in fact Zillow has been a double since January and thus could be primed for a fall.