Shares of Elliman, other realtors fall after $1.78 billion broker commission verdict (updated)

Agnt

01/11/2023 20:28

(Recasts with closing prices, adds Redfin comment)
    By Chibuike Oguh and Jonathan Stempel
       NEW YORK, Nov 1 (Reuters) - Shares of Douglas Elliman
 DOUG.N , Compass  COMP.N  and eXp World Holdings  EXPI.O 
closed lower on Wednesday after the companies were sued for
allegedly conspiring to artificially inflate their commissions
from home sales.
    The proposed class action was filed on Tuesday in Kansas
City, Missouri, just hours after a jury there found the National
Association of Realtors and other brokerages, including
Berkshire Hathaway's  BRKa.N  HomeServices of America, liable to
pay $1.78 billion in damages for similar commission practices. 
    Damages in that first case could be tripled under federal
antitrust law to more than $5.3 billion.
    The verdict could upend decades-old practices that have
allowed real estate agents to boost commissions by forcing
sellers to pay commissions to buyers' real estate brokers. Home
sellers complained that this model suppressed competition.
    Shares of the new defendants fell between 0.3% and 7.3% on
Wednesday. Redfin  RDFN.O , also a defendant in the lawsuit,
rebounded from earlier losses and finished up 0.7%.
    Both lawsuits were filed in the U.S. District Court in
Western Missouri by the same lawyer. The first action was
brought on behalf of sellers of more than 260,000 homes in
Missouri, Kansas and Illinois between 2015 and 2022. Tuesday's
lawsuit is on behalf of sellers nationwide. 
    A spokesperson for eXp said the company was still studying
the complaint, adding: "We are committed to upholding fair and
transparent practices compliant with law and we already have
mechanisms and a plan in place that enables buyers and sellers
to negotiate commissions." 
    Representatives of Compass and Douglas Elliman declined to
comment. A Redfin spokesperson declined to comment, referring
questions to a previously published statement by CEO Glenn
Kelman saying that the lawsuit will "ensure major change" to the
industry given the size of the award even though "years of
appeal" lay ahead.
    BTIG analyst Soham Bhonsle in an investor note said the fact
that Douglas Elliman, Redfin, Compass and eXp were being sued by
the same lawyers was a negative for their stocks.
    Shares of Re/Max  RMAX.N  and Anywhere Real Estate  HOUS.N ,
two other brokerages that had initially been defendants in the
first lawsuit but settled prior to trial, finished up 5.4% and
down 3.9%, respectively, on Wednesday. Both had fallen on
Tuesday despite their earlier settlements.
     Zillow  ZG.O  shares initially fell 0.33% after brokerage
Jefferies cut its price target, citing the impact of Tuesday's
verdict. Zillow stock ended 0.7% higher on Wednesday following a
7% drop the previous day. While Zillow is not a defendant in
either lawsuit, Jefferies said Tuesday's verdict "increases the
chances of a ban on commission sharing and Zillow having to
pivot the business model." Zillow did not immediately respond to
a request for comment.
    On Tuesday, representatives of NAR and HomeServices said
they planned to appeal. 

 (Reporting by Chibuike Oguh and Jonathan Stempel in New York;
Editing by Michelle Price, Bill Berkrot and Matthew Lewis)
 ((Chibuike.Oguh@thomsonreuters.com; +332-219-1834; Reuters
Messaging: chibuike.oguh.thomsonreuters.com@reuters.net))