CoStar Chairman Ousted In Hedge Fund-Driven Board Shake-Up
CoStar Group’s earliest investor left his position as chair of the company’s board as part of a shakeup described as part of a “refresh” to the company's approach to leadership and spending.
Three members of the analytics giant's board of directors were replaced and a new independent board chair was announced, effective immediately. Attorney Michael Klein stepped down from his position as board chair and CoStar is forming a capital allocation committee to scrutinize financial performance and future strategy.
CoStar simultaneously struck new support agreements with New York-based hedge fund Third Point and investment manager D.E. Shaw & Co. and agreed to review executive compensation packages to ensure they aligned with stockholder value creation.
“We are pleased to be significant CoStar stockholders and believe that these steps to refresh Board composition, update executive compensation programs and articulate a disciplined capital allocation strategy will improve the business and drive significant stockholder value,” Third Point CEO Daniel Loeb said in a statement.
The newly formed capital committee will especially focus on ensuring CoStar’s investment in Homes.com is on a path to profitability after it was acquired for $156M in cash in 2021. The committee will also oversee the execution of the company’s strategy and optimize its investments and operations.
Craig Huber, an analyst covering CoStar and the founder of Huber Research Partners, said the leadership changes and shift in structure were likely due to pressure from major shareholders to rein in spending that has picked up in the last two years.
CoStar poured more than $1B into Homes.com in 2024 attempting to make the site profitable, and spent an estimated $1.6B to acquire Matterport in February, the same month it made a $1.7B bid for Australian property listings site Domain.
Last February, CoStar spent $339M to buy its new Virginia headquarters and plans to spend $460M to expand its research and technology center.
“I’ve rarely seen such a consolidated amount of spending in such a short amount of time for a company of this size,” Huber said, adding that the expensive endeavors were weighing on its stock's value.
The new capital committee includes a group of independent directors, including CoStar Group’s CEO Andy Florance, new board members John Berisford and Christine McCarthy, and Robert Musslewhite, a healthcare executive.
The new board members include Berisford, previously the president of S&P Global Ratings; McCarthy, former chief financial officer at The Walt Disney Co.; and Rachel Glaser, former chief financial officer at Etsy.
They replaced Klein, Christopher Nassetta and Laura Kaplan. Louise Sams, a former executive at Turner Broadcasting System who has been on CoStar’s board since 2019, will take over as chair.
The board shuffling was framed as part of a longstanding plan, and Sams offered effusive compliments for each departing member in a statement Monday.
“Michael, Chris and Laura have exemplified what it means to be a thoughtful, engaged and highly collaborative Board member and an advocate for stockholders,” she said. “Their retirements are part of our ongoing succession planning and refreshment process, and we wish them all the best.”
CoStar’s stock was up roughly 3% early Monday despite a bumpy start to the broader trading day. Its stock value has been largely flat over the last six months.
“The changes announced today, coupled with CoStar’s leading franchises, position the Company to create sustainable value for stockholders,” Michael O’Mary, managing director at D.E. Shaw, said in a statement.
