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Trulia Inc (NYSE:TRLA) and Zillow (NASDAQ:Z) Shares Spike after Talk of Acquisition

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By on Technology & Software

Unidentified sources leaked out word of Zillow Inc (NASDAQ:Z)’s interest in acquiring competitor Trulia Inc (NYSE:TRLA)  in a deal that could be valued as much as $2 billion. Negotiations between the two online real estate marketplace giants continue, rumored to be officially announced as early as next week. Both Zillow and Trulia declined to comment.

In June of 2014 alone, Zillow attracted nearly 83 million unique visitors, averaging over 75 million unique monthly visitors year to date. Combined with Trulia’s reported 51 million unique visitors every month, the acquisition would turn Zillow in to a house hunter’s powerhouse.

This news came in today after Trulia was in the process of acquiring Move in a $700 million transaction so that both companies combined could outperform Zillow.

Word of the potential acquisition caused stock in both companies to spike. As of 1:54 PM EST, Zillow shares were at $126.26, jumping up over 22% to $154.43, by 2:16PM.

Shares of Trulia jumped up 30%, going from $40.46 at 1:52PM, up to $52.80 twelve minutes later.

Just recently on July 17th, Barclays reiterated their equal weight rating, raising their price target from $38.00 to $45.00.  Macquarie is a firm that initiated coverage and gave a rating of outperform.

Oppenheimer and RBC Capital both gave a consensus of “market and sector perform” with a price target of $45.00.   Needham & Company LLC gave a positive rating.

Many of these analysts based their ratings on the company generating a loss of $0.14 EPS in the first quarter of 2014, while in the prior three consecutive quarters the company generated positive earnings of $0.07, 0.08, and $0.04 respectively.  Their actual revenue bottom line has been growing from $18.54 million to $54.40 million in a linear fashion.

It’s important to remember that this merger talks can go south at any time and is no guarantee that it will go through.

Strangely, Directory Sami Inkinen unloaded 8,300 shares of Trulia and CEO Peter Flint sold $11.2 million of shares weeks before the merger rumor occurred.  While Zillow’s CEO Spencer Rascoff sold $19.9 million of stock with insiders having sold a total of $69 million total shares.  One speculation is that these sales were done to generate income, to pay taxes, as insiders still retain a significant percentage in the company.  A second most likely reason is they are part of a program in their company where they automatically sell stocks at certain points during the year.  This prevents any manager from being in trouble for inside trading since they are selling stock at give points without any control.

 

 

 

 

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