D.E. Shaw criticizes CoStar management, plans shareholder action

D.E. Shaw & Co., which manages more than $85 billion in investment capital, sent an open letter to CoStar Group Inc. (NASDAQ: CSGP) directors expressing disappointment with the company's capital allocation and performance.

The investment firm criticized CoStar's spending on its Homes.com business, stating the company will have invested more than $3 billion in the platform by year-end. According to the letter, Homes.com has generated $80 million in annual revenue and over $2 billion in cumulative losses, falling short of management's projections of $700 million to $1 billion in revenue by 2027.

D.E. Shaw noted that CoStar shareholders who purchased stock in the last five years have lost money, with the stock declining 32% cumulatively over five consecutive years while the S&P 500 gained 101% during the same period.

The firm stated CoStar's January 7 business update indicated the company will continue investing in Homes.com despite not expecting profitability until 2030. D.E. Shaw estimates that separating from Homes.com and implementing new leadership could generate more than $10 billion in shareholder value.

The letter highlighted executive compensation concerns, noting CEO Andy Florance earned approximately $130 million over five years while the company underperformed. Nearly half of shares voted against CoStar's say-on-pay proposal at the 2025 annual meeting.

D.E. Shaw announced its intention to support shareholder-driven change at CoStar's 2026 annual meeting, citing the need for improved capital allocation and enhanced board oversight.

The investment firm holds a significant economic position in CoStar through funds it manages or advises.

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