Key Takeaways:
A securities class action lawsuit against Zillow Group Inc. alleges the company misled investors about a $100 million agreement with Redfin Corp. that the Federal Trade Commission called an illegal deal to suppress competition.
"The complaint asserts that Zillow characterized its agreement with Redfin as a partnership, when in reality it paid $100 million to eliminate a competitor," Adam McCall, a partner at Bleichmar Fonti & Auld LLP, which filed the suit, said.
Zillow's Class C shares fell 16.54% and Class A shares dropped 17.13% on Feb. 11, 2026, after Chief Financial Officer Jeremy Wacksman told investors that increased legal expenses would create a 200-basis-point headwind to EBITDA margins in the first quarter. The decline erased billions in market value from the Seattle-based real estate platform.
The lawsuit, filed in the U.S. District Court for the Western District of Washington, claims Zillow violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. Investors have until Aug. 10, 2026, to seek appointment as lead plaintiff in the case, captioned Breidert v. Zillow Group Inc., No. 26-cv-02016.
The FTC first sued Zillow and Redfin on Sept. 30, 2025, alleging the companies violated federal antitrust law. According to the complaint, Zillow paid Redfin $100 million in February 2025 to exit the multifamily rental listings market and transition its advertising business to Zillow. Zillow's stock fell 4.33% on Class C shares and 4.5% on Class A shares when the FTC action was announced.
On May 7, 2026, a federal judge rejected Zillow and Redfin's request to dismiss the FTC lawsuit, sending Zillow shares down another 1.9% and 1.76%, respectively.
The class action seeks unspecified damages on behalf of investors who purchased Zillow securities between Feb. 6, 2025, and Feb. 10, 2026. Bleichmar Fonti & Auld has previously recovered more than $900 million from Tesla Inc.'s board of directors and $420 million from Teva Pharmaceutical Industries Ltd. in securities litigation.
The lawsuit adds to Zillow's legal challenges as it defends against the FTC's antitrust claims. The company faces potential financial penalties and the risk of court-ordered changes to its business practices if the government prevails. Investors will watch for the court's ruling on class certification and any settlement discussions ahead of the August lead plaintiff deadline.
This article is for informational purposes only and does not constitute investment advice.
