CoStar’s foray into residential real estate has drawn the ire of a major shareholder, who released a strongly worded letter to the real estate data juggernaut’s leadership Tuesday calling for big changes.

Third Point CEO Daniel Loeb, whose hedge fund held more than 2 million CoStar Group shares as of last June, is calling for the company to take action in response to its “abysmal” stock performance.

CoStar's stock price was down 27% over the last five years before rising 3% Tuesday following the release of Loeb's letter. The letter says CoStar CEO Andy Florance received a $37M pay package in 2024.

“The Company’s anemic performance can be ascribed entirely to the misallocation of billions of dollars into Homes.com, overseen by a feckless board of directors that has failed to protect shareholders from Mr. Florance’s quixotic quest while rewarding him with exorbitant pay packages,” Loeb wrote in the letter.

“Like an elementary school child who wins a prize even for finishing last, Mr. Florance’s bonuses are perhaps the costliest ‘Participation Award’ our firm has witnessed.”

CoStar purchased Homes.Com for $156M in cash in 2021 and has invested around $3B in its U.S. residential real estate business since then, but it generated $60M in 2024 and was expected to bring in $80M last year, according to Loeb's letter.

The letter calls for a board shake-up with “more qualified directors,” management compensation that is more tightly linked to shareholder returns, and a reorientation toward CoStar’s core commercial real estate business, which Loeb described as sound.

He also called on CoStar leadership to pursue “strategic alternatives” for Homes.com and its related residential real estate business, including divesting or shutting down the business.

A CoStar spokesperson said in a statement to Bisnow that the company has “conducted extensive engagement with stockholders” to inform its investment priorities and remains optimistic about Homes.com.

“We enter 2026 with considerable momentum and a clear plan to continue building our core platforms while scaling Homes.com, which is a critical component to our comprehensive digital real estate platform and next chapter of profitable growth,” the spokesperson said.

The statement also says CoStar’s strategic vision was unanimously approved by the board of directors and capital allocation committee, which both include members nominated by Third Point.

Wednesday morning, CoStar issued a press release with an additional response, outlining a series of steps it has taken in response to stockholder feedback and saying Third Point's letter is “completely detached from reality.”

“Unhappy with the conclusions of the independent Board they helped pick, Third Point, like a child with a board game, wants to throw the pieces off the board,” the press release says.

The capital allocation committee was formed in April, coinciding with the resignation of CoStar Chair Michael Klein as part of a “standstill agreement” the firm reached with Third Point and investor D.E. Shaw.

But Loeb's Tuesday letter says the agreement expired the night before and he “will now take concrete actions to protect our investment and ensure that the company is governed and managed in a manner that will create long-term, sustainable value for all shareholders.”

“Since most board members appear incapable of imposing discipline on Mr. Florance’s empire-building gambit, we intend to introduce shareholders to a slate of highly experienced new directors to be voted onto the board to reverse the downward spiral that has become synonymous with this CEO and his supine enablers,” the letter says.

UPDATE, JAN. 28, 10:30 A.M. ET: This story has been updated to include the response CoStar released Wednesday morning.