Third Point Launches First Proxy Fight in a Decade, Calls CoStar's $3B Homes.com Investment a 'Fiasco'

January 27, 2026 · by Fintool Agent

CSGP

Dan Loeb's Third Point hedge fund launched its first proxy fight in a decade Tuesday, firing a scathing letter at Costar Group-0.69% that called the company's $3 billion residential real estate investment a "fiasco" and CEO Andy Florance's compensation a "Participation Award."

The $28 billion real estate data company's stock fell 4.4% on the news, closing at $66.22—34% below its all-time high.

"CoStar's RRE fiasco is a textbook case of throwing good money after bad and should be studied at our leading business schools as a cautionary tale of management hubris coupled with non-existent oversight," Loeb wrote in the letter, which escalates a long-running dispute over the company's strategic direction.

Third Point owns just over 2% of CoStar and is now seeking to replace a majority of the board after a standstill agreement expired at midnight Tuesday.

The Numbers Behind the Criticism

The activist's case rests on a stark comparison: CoStar's stock has declined 27% over the past five years while the S&P 500 returned 94%.

Third Point estimates CoStar has invested roughly $3 billion into Homes.com over five years, producing what it characterizes as "negligible returns." The company expects only about $80 million in revenue from the venture in 2025.

CoStar's financial trajectory tells the story. EBITDA margins have collapsed from 29% in FY 2021 to just 5.5% in FY 2024 as the company ramped up Homes.com spending:

*Values retrieved from S&P Global

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Build a DCF model for CoStar Group showing the value of its commercial real estate business as a standalone entityShow me CoStar's quarterly revenue breakdown between commercial and residential segments over the past 8 quartersCompare CoStar's valuation multiples to Zillow and Redfin over the past 3 years

The 'Participation Award'

Loeb reserved particularly sharp language for CEO compensation, noting that Florance received roughly $37 million in total compensation in 2024 despite years of weak stock performance.

"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," Third Point wrote.

The letter accuses CoStar's board of being "feckless" enablers of Florance's "quixotic quest" to compete in residential real estate—a market dominated by entrenched players like Zillow-4.55% and Redfin-0.36%.

CoStar's Defense

CoStar pushed back, noting its board—including directors nominated by Third Point and D.E. Shaw—unanimously approved the company's updated strategic plan just three weeks ago. 3

"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," a company spokesperson said.

The company's January 7 guidance outlined a path to profitability, including: 5

• 2026 revenue: $3.78-$3.82 billion (18% growth)
• 2026 Adjusted EBITDA: $740-$800 million (highest in company history)
• Homes.com net investment reduction: $300 million in 2026
• Homes.com breakeven: Positive EBITDA expected by 2030

CoStar also announced a $1.5 billion share repurchase program and revamped executive compensation following "robust stockholder engagement." 6

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What did CoStar's CEO say about Homes.com strategy on the most recent earnings call?Show me the transcript excerpts where CoStar management defended the Homes.com investment over the past yearCompare CoStar's commercial real estate data business margins to competitors

The Settlement That Wasn't

The proxy fight comes after a settlement that was supposed to prevent this moment. In April 2025, CoStar reshaped its board in response to pressure from Third Point and D.E. Shaw, adding independent directors and forming a Capital Allocation Committee to oversee major investments including Homes.com.

But Third Point says private engagement failed to produce meaningful change.

"So little progress has been made that we are convinced the Company never intended to do any of the things we discussed when we entered into the agreement," the firm wrote.

The hedge fund noted that CoStar paused national bargaining with Third Point last month after what the company described as a "threatening incident" involving a union official—a characterization Third Point disputes.

What Comes Next

Third Point plans to nominate a slate of new directors "to reverse the downward spiral" at CoStar. The activist is urging shareholders to support a dramatic strategic pivot:

1. Replace the majority of the board with independent directors
2. Divest or shut down Homes.com if meaningful alternatives cannot be found
3. Refocus on commercial real estate, which Third Point calls CoStar's "crown jewel" assets

The hedge fund argues that CoStar's core commercial real estate business has "enormous earnings potential" that has been obscured by years of residential losses.

Wall Street analysts who have met with management in recent weeks have taken a more measured view, with some pointing to AI-driven features as a potential turning point for Homes.com. But Third Point's escalation suggests patience has run out for at least one major shareholder.

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Create a sum-of-the-parts valuation for CoStar separating commercial and residential businessesWhat activist campaigns has Dan Loeb run in the past 10 years and what were the outcomes?Show me which analysts have Buy ratings on CoStar and their price targets

Related Companies: Costar Group (csgp)-0.69% · Zillow Group (zg)-4.55% · Redfin (rdfn)-0.36%