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Navigating Muddy Waters: The Future of Zillow and Trulia Meagan Braun Whitney Hales Nuan He Monterey Institue of International Studies The Economist Case Study Challenge November 2014

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Page 1: Navigating Muddy Waters: The Future of Zillow and Trulia · Navigating Muddy Waters: The Future of Zillow and Trulia Meagan Braun Whitney Hales Nuan He Monterey Institue of International

Navigating Muddy Waters:

The Future of Zillow and Trulia

Meagan Braun Whitney Hales

Nuan He

Monterey Institue of International Studies

The Economist Case Study Challenge

November 2014

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Table  of  Contents  

Introduction  ..............................................................................................................................  2  

Independent  and  Combined  Firm  Valuations  ................................................................  3  The  Online  Real  Estate  Industry  .........................................................................................  6  

Standalone  Scenarios  .............................................................................................................  9  Investment  Decisions  ..........................................................................................................  10  

Conclusion  ...............................................................................................................................  12  

Appendix  .................................................................................................................................  14  Appendix  A:  ......................................................................................................................................  14  A1:  Explanation  of  separate  firm  valuation  process  and  findings  ..........................................  14  A2:  Cash  Flow  after  Tax  methodology:  ...............................................................................................  14  

Appendix  B:  Explanation  of  Valuation  of  Synergies  ...........................................................  21  Appendix  C:  Explanation  of  Different  Scenarios  for  Standalone  Companies  .............  24  Alternative  1:  High  Risk  .............................................................................................................................  24  Alternative  2:  Low  Growth  .......................................................................................................................  24  Alternative  3:  Negative  Stable  Growth  ................................................................................................  25  

Notes  and  Bibliography  ......................................................................................................  27    

 

     

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Introduction    

On July 28, 2014, online real estate media company Zillow announced its plan to

acquire its competitor Trulia. The deal is expected to close in early 2015 pending

regulatory approval. In an all-stock transaction, each Trulia share will be exchanged for

0.444 shares of Zillow and each Zillow share will receive one share of the merged

company.i This exchange results in Trulia shareholders accounting for 33% of the new

company and Zillow shareholders accounting for 67%. The pending merger raises

questions about the future of the combined company and the entire industry.

Real estate advertising is an estimated $12 billion industry.ii While Zillow and

Trulia have grown rapidly since 2005, they still only capture 4% of this spending. These

sites, termed syndicators, aggregate data from online databases and Multiple Listing

Servers (MLS); provide real estate estimates; and allow realtors to post listings. While

individuals browse the sites for free, realtors pay to associate their companies with the

listings. The sites entice realtors with large monthly viewership. In September 2014,

Trulia captured 55 million unique visitors and Zillow captured 82.8 million. Despite huge

growth in viewership, both companies are currently operating at a loss.

We value the independent companies and the synergies of the combined firm to

provide a basis for comparison with the current market values of the firms. This allows us

to assess the terms of the deal and decide which company emerges as the winner. We also

predict the futures of the standalone companies, the combined firm, and the industry as a

whole. We conclude by recommending stock trades to be made around the transaction.

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Independent  and  Combined  Firm  Valuations  

In mergers and acquisitions, one firm generally benefits more than the other.iii To

determine which company benefits more, we must value each firm individually. We used

discounted cash flows to determine the equity value of each firm. Appendix A describes

our methodology. We found share prices of $96.74 for Zillow and $57.78 for Trulia. In

October 2014 Zillow traded at an average of $107.56, while Trulia traded at $45.25.

Thus, Zillow is currently overvalued by the market, while Trulia is undervalued.

Figure 1: Undervalued or Overvalued?

Appendix B describes our valuation of the combined firm with and without synergies.

Table 1 below highlights the results. We found the value of synergies to be $1.038

billion.

$0.00

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

Trulia Zillow

Fundamental Value

October 2014 Stock Price

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Table 1: Value of Combined Firm Equity Value Stock Price

Without Synergy $6.040 billion $106.50 With Synergy $7.075 billion $124.81 Synergy Value $1.038 billion $18.31

When talks of the merger surfaced in July, both companies’ stock prices

increased, peaking on July 25. At that time, the fixed 0.444 exchange ratio represented a

25% premium for Trulia shareholders, which aligns with average control premiums in

2013.iv Historically, the ratio of Trulia’s share price to Zillow’s share price averages 0.37.

However, since the announcement, both companies’ stock prices have been decreasing.

Zillow’s stock price has been decreasing at a faster rate, resulting in a diminishing

premium for Trulia. In October, the premium averaged only 5.57%, significantly lower

than the original 25%. Figure 2 illustrates the historic ratio of the companies’ stocks and

the premium that Trulia receives at different stock prices of Zillow. Table 2 shows the

stock prices and premiums at several points in time. As the ratio of Trulia to Zillow stock

price approaches 0.444, the premium continues to disappear, completely vanishing when

it exceeds this point.

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Figure 2: Ratio of Trulia to Zillow Share Price

Table 2: Trulia’s Diminishing Premium Fundamental

Value Stock Price

July 25, 2014 October 2014 avg. Trulia $57.78 $56.35 $45.30

Zillow $96.74 $158.86 $107.71

What Trulia is getting $42.95 $70.53 $47.82

Premium -25.66% 25.17% 5.57%

Amount of premium -$553,280,000 $529,199,000 $93,310,000

Given the companies’ volatile stock performance, the fixed exchange rate is an

inappropriate deal structure. A combination cash/stock deal would ensure an appropriate

fixed control premium and greater security for Trulia shareholders. Given the lack of

consideration for Trulia’s premium, accusations have been leveled against Trulia’s Board

of Directors, claiming that they did not fulfill their fiduciary responsibilities.v Trulia’s

Board did not put the firm up for auction, or even solicit other bids, both of which could

have resulted in a higher premium. However, the Board is unlikely to be held liable due

to the 25% premium on the date of announcement. Unless it is found that the Board acted

0.2

0.25

0.3

0.35

0.4

0.45

0.5

0.55 R

atio

of T

rulia

Sha

re P

rice

to

Zillo

w S

hare

Pric

e

Date

Ratio

Historic Ratio Average Fixed Deal Ratio

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with gross negligence, i.e. they categorically did not consider the selling price, Trulia

shareholders will obtain no recourse.vi

Considering the deal structure and the firm values, Zillow emerges as the clear

winner. Not only is Trulia undervalued in the market, meaning that Zillow is acquiring it

for less than it is worth, but Trulia’s premium is also less than the synergy value. Trulia’s

premium, based on a 0.444 exchange ratio, shrinks as the price of Zillow’s stock falls.

Thus, Zillow gets the full value of potential synergies while paying a shrinking premium.

The  Online  Real  Estate  Industry      

Online media companies often cite the number of users as a key performance

indicator. However, revenues for Zillow and Trulia depend upon attracting realtors and

brokers. While the sites must attract enough viewers to entice realtors to pay for listings,

there is a greater emphasis on attracting viewers than advertisers. Zillow CEO Spencer

Rascoff addresses this disconnect, claiming that “the advertising dollars will follow the

audience.”vii However, there is much reason to doubt his assertion.

Many of Zillow’s viewers are idle users with little interest in buying or selling a

house anytime soon. As few as 3.8 million of its 82 million monthly visitors are actively

seeking mortgages in the next three months.viii The National Association of Realtors

reports that leads from syndicator sites produce less than 10% of property buyers.ix These

figures are indicative of broader macroeconomic trends: decreasing homeownership rates

amongst Millennials and Generation X-ers. The number of millennials obtaining

mortgages from 2009-2011 was half that of Generation X-ers a decade prior.x Trulia also

reports a 5% decrease in the homeownership rates in 35-54 year olds.xi As these two

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constituencies form the bulk of Trulia and Zillow’s viewers, this trend is particularly

troubling. If the sites cannot provide valuable leads to realtors, realtors will fail to see the

value in paying for the sites, thus disrupting the companies’ revenue streams.

Another factor contributing to realtor dissatisfaction is syndicator sites’ lack of

accountability for data accuracy. These sites are not subject to the same legal

requirements for data accuracy as MLS providers, and consequently, the quality suffers.

In a 2011 study, Trulia found that 69% of errors in online real estate listings came

directly from third-party syndication of MLS sources. Of 1.2 million listings, 10%

contained errors: 51% of errors were in price, 41% were in property status, and 8% were

in both.xii In addition, the sites overinflate inventory by listing redundant properties. In

San Diego, Abbott Realty Group estimates that Zillow overstates available inventory by

300%.xiii RealtyV2 reached a similar conclusion by comparing Zillow’s listings with that

of local MLS providers. In the same time period and zip code, Zillow listed nearly twice

compared to MLS.xiv Zillow’s Zestimates are equally sporadic: only 50% of Zestimates

are within 5% of the actual sale price.xv These inaccuracies lead to viewer confusion and

realtor frustration. Jim Abbott, President of Abbott Realty Group, suggests that

syndicator sites are “failed approaches to property marketing which frustrate home

buyers, hurt home sellers, and bring little value to brokers and agents who own the

listings.”xvi

Due to the lack of profitable sales leads and the detrimental effects of inaccurate

listings, many realtors have begun to withdraw from Zillow and Trulia. In January 2012,

Abbott announced that his company would remove all current listings and no longer post

properties on syndicator sites. Since then, a multitude of realtors and brokerages have

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withdrawn. Crye-Leike, one of the top five brokers in the nation, reported no negative

“impact of market share, days-on-the-market, or sales” after pulling all listings from

Zillow.xvii Realogy, another top-ranked firm, reported that leads from their company

website have viewership growth rates outpacing those of syndicator sites and they

convert to sales three times as often.xviii Bob Peltier, President of Edina Realty,

summarizes his firm’s position after disassociating from syndicators: "The inaccuracies

we've seen on third-party aggregator sites give us cause for alarm, and the reality is that

we are no longer willing to surrender our business – or the consumer's real estate

experience – to third party aggregators."xix Syndicator sites clearly do not provide the

benefits to realtors that they claim. On the contrary, they often damage realtors’ sales

prospects. Some even argue that third-party syndicators are fundamentally unnecessary.

Virtually all realtors and brokers have their own websites that link directly to the MLS

feeds, eliminating the need for third-party sites.xx

Rascoff frequently cites the 4% market penetration of the two companies into real

estate advertising as an opportunity for growth. However, of 500,000 active realtors in

the U.S., less than 15% generate enough business to justify paying syndicator sites’

advertising fees.xxi In fact, many realtors report that they cannot afford the monthly fees

for Zillow and Trulia - $320 and $206, respectively.xxii Zillow currently reports 55,000

agents advertising on the site, and Trulia reports 70,000.xxiii If only 15% of realtors can

afford to pay for the sites, the combined companies may have already saturated the

market. Not only is there little room left for growth, but realtors have begun moving in

the opposite direction. The trend of realtor withdrawal foreshadows an ominous future for

Zillow and Trulia. As realtors disappear, so does revenue. For firms that have yet to

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achieve consistent profits, the ability to attract paying customers will only become more

difficult.

Standalone  Scenarios     To account for industry trends, we adjusted our standalone firm valuations. Our

first scenario uses a high risk premium, corresponding to the risk of the firms

experiencing slower growth than assigned in the fundamental valuation. The firms may

find it difficult to continue attracting high numbers of advertisers, given the trend of

realtor withdrawal. The second scenario uses a low growth rate, again corresponding to

the difficulty in attracting advertisers.xxiv Our final scenario incorporates a negative

growth rate in the terminal year, corresponding to an ultimate decline in the industry. The

assumptions and growth rates used for each scenario are described in Appendix C. The

stock price projections for each scenario are shown in Figure 3 below.

Figure 3: Standalone Valuations

$0.00

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

Trulia Zillow

Shar

e Pr

ice

Baseline

High Risk

Low Growth

Negative Stable Growth

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For both companies, all three alternatives significantly lower firm value and stock

prices. If we expect any of these scenarios to occur, it means that both firms are severely

overvalued in the market. These scenarios are useful to assess the sensitivity of the firms’

valuations to several variables. Both firms are most sensitive to an increase in risk

premium. Zillow and Trulia’s share prices fell 65% when incorporating a 5% risk

premium. Likewise, decreasing the growth rates caused the shares prices to drop 34% for

Zillow and 54% for Trulia. Since we expect to see decreased interest from realtors and

advertisers, all of our scenarios show declining stock prices. We do not expect the future

to conform to a single scenario; rather, it will lie somewhere along the spectrum of

values. As the companies face increased difficulty in attracting realtors, the firm value

will move along the spectrum, from our fundamental value to lower values of the three

alternatives.

Investment  Decisions    

Before it can attract investors, Zillow-Trulia must address its lack of profitability,

ensure data accuracy, and adapt its revenue streams to survive realtor withdrawal. First,

the combined company must achieve the anticipated cost savings from the merger. These

savings will increase operating efficiencies and allow the combined company to obtain

consistent profits. Next, Zillow-Trulia must ensure the accuracy of its listings to secure

the loyalty of viewers and realtors. Otherwise, realtors and advertising revenue will

disappear.

Finally, the combined company must adapt its revenue streams to guarantee

financial sustainability in the long-run. The companies currently charge rates that only

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15% of realtors can afford; they cannot risk losing customers by increasing fees. Nor can

they begin charging viewers without seeing sharp drop-offs in viewership.xxv In order to

ensure long-term viability of the company’s revenues, we foresee two alternatives. First,

Zillow-Trulia could lower its advertising fees. This would allow them to attract more

realtors, further penetrate the market, and even decrease concerns about data accuracy as

the number of realtor-provided postings (rather than third-party sourced information)

increases. Alternatively, the company could completely stop charging realtors and target

other companies for advertising instead. This would safeguard the companies from the

threat of realtor withdrawal. With no fee, there would be little downside to realtors

posting on the sites. This too, would improve data accuracy. The company could then

focus on attracting home furnishing, moving services, or other related companies to

advertise on the site in a model similar to Facebook’s. Fundamentally, the question is,

can Zillow-Trulia accomplish these tasks?

Only if the combined company can capture expected cost savings, improve data

accuracy, and shift its revenue streams, would we recommend that investors purchase the

stock. However, we do not believe that these conditions can be met. Throughout the

merger conversations, neither company even addressed data accuracy concerns, let alone

devised a strategy to resolve the issue. xxvi Additionally, completely overhauling the

existing revenue structure would require a costly shift in sales and marketing strategies.

While synergistic cost savings may be realized, they are unlikely to be large enough to

offset lost revenue from realtor withdrawal.

Given our pessimistic outlook of the industry and our valuations, we recommend

that all shareholders sell. We valued the combined firm with synergy at $124.81 per

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share. However, potential synergies are predicated on a growing online real estate sector.

Our analysis suggests that the industry faces a pessimistic future. Market prices of both

companies have fallen by approximately 30%, showing that the market concurs. In

addition, short interest in Zillow has spiked. As of November 3, 2014, 42.68% of

Zillow’s float is shorted.xxvii Investors with greater risk appetites may execute profitable

trades by shorting Zillow. Generally, we recommend selling and exiting the online real

estate syndicator sector entirely.

Recent transactions by Zillow insiders seem to support this strategy. Despite

rhetoric describing the opportunities for Zillow to acquire greater market share and

increase earnings, Rascoff has been selling large amounts of Zillow shares in the past few

months. Since the merger was announced, Rascoff has sold more than $11 million of

Zillow stock on top of additional offloading since the beginning of the year. Similarly,

Trulia insiders have unloaded $28 million since the January 2014.xxviii These actions

contradict both companies’ belief in future prosperity of the combined firm. If they claim

that it is such a great deal, why are insiders dropping stocks so rapidly? This pattern

suggests that insiders already see the ominous future of the industry and are jumping ship

while they can.

Conclusion     What distinguishes Zillow-Trulia in the merger marketplace? Red flags seem to

abound in this deal. Although historically acquirers’ stocks fall following merger

announcements, the current M&A environment shows acquirers’ stocks rising. This is

consistent with the low interest rate environment.xxix As noted, Zillow and Trulia prices

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have both been falling. The segment that Zillow and Trulia operate in is not akin to social

media companies and has a murky future. There has been significant insider selling by

executives of both companies. Troublingly, the Trulia Board never sought out other

bidders, and the Trulia premium has eroded from the outset. It seems that there are

governance issues on both sides of the deal, from heavy insider selling to issues of board

negligence. Coupled with our projections for the industry, we foresee a multitude of

problems attached to the deal. We do not believe that this merger will be value-

enhancing.

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Appendix  

Appendix  A:    

A1:  Explanation  of  separate  firm  valuation  process  and  findings  To determine the fundamental value of each firm individually (Zillow and Trulia), we utilized a nine-year, three-stage growth, Discounted Cash Flow Model plus the value of the terminal year. We projected the Future Free Cash Flows (FFCF) until year 2022 and discounted each to calculate the Present Value of the FFCF. In addition we calculated the FFCF for the terminal year (2023) with a separate stable growth rate. The free cash flow values were determined by first calculating the Earnings Before Interest and Taxes (EBIT), applying the corporate tax rate of 35%, then adding amortization from R&D expenses and amortization from depreciation expenses, subtracting capital expenditure and subtracting the respective year’s Net Working Capital. 𝐹𝑟𝑒𝑒  𝐶𝑎𝑠ℎ  𝐹𝑙𝑜𝑤𝑠  

= 𝐸𝐵𝐼𝑇 − 𝑇𝑎𝑥 +  𝐴𝑚𝑜𝑟𝑡𝑖𝑧𝑎𝑡𝑖𝑜𝑛   𝑓𝑟𝑜𝑚  𝑅&𝐷 +  𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛− 𝐶𝑎𝑝𝑖𝑡𝑎𝑙  𝐸𝑥𝑝𝑒𝑛𝑑𝑖𝑡𝑢𝑟𝑒𝑠 − 𝑁𝑒𝑡  𝑊𝑜𝑟𝑘𝑖𝑛𝑔  𝐶𝑎𝑝𝑖𝑡𝑎𝑙  

By combining the PV of the discounted cash flows with the PV of the Horizon value, we determined the firm/enterprise value of each company. With the enterprise value, we then determined the firm equity value by subtracting the debt value from and adding the cash back to the enterprise value.

𝐸𝑛𝑡𝑒𝑟𝑝𝑟𝑖𝑠𝑒  𝑉𝑎𝑙𝑢𝑒 = 𝑃𝑉  𝑜𝑓  𝐹𝑢𝑡𝑢𝑟𝑒  𝐶𝑎𝑠ℎ  𝐹𝑙𝑜𝑤𝑠 + 𝐻𝑜𝑟𝑖𝑧𝑜𝑛  𝑉𝑎𝑙𝑢𝑒  

𝐻𝑜𝑟𝑖𝑧𝑜𝑛  𝑉𝑎𝑙𝑢𝑒 =𝑃𝑉  𝑜𝑓  𝑡𝑒𝑟𝑚𝑖𝑛𝑎𝑙  𝑦𝑒𝑎𝑟  𝑐𝑎𝑠ℎ  𝑓𝑙𝑜𝑤

𝐶𝑜𝑠𝑡  𝑜𝑓  𝐶𝑎𝑝𝑖𝑡𝑎𝑙   𝑘 − 𝑆𝑡𝑎𝑏𝑙𝑒𝐺𝑟𝑜𝑤𝑡ℎ  𝑅𝑎𝑡𝑒  (𝑔)

𝐸𝑞𝑢𝑖𝑡𝑦  𝑉𝑎𝑙𝑢𝑒 = 𝐸𝑛𝑡𝑒𝑟𝑝𝑟𝑖𝑠𝑒  𝑉𝑎𝑙𝑢𝑒 − 𝐷𝑒𝑏𝑡  𝑉𝑎𝑙𝑢𝑒 + 𝐶𝑎𝑠ℎ  

Due to significant insider selling, we thought it necessary to separate the value of the options outstanding from the total equity value to determine the true equity value of the firm. After subtracting the value of the options outstanding (Market price per option times Number of options outstanding) from the equity value, we then divided our new equity value by the total number of shares outstanding to determine the true stock price for each firm. We based our value for the number of shares outstanding from that reported by Yahoo Finance.

A2:  Cash  Flow  after  Tax  methodology:   In our Cash Flow after tax methodology we calculated revenues (sales) on a 3-stage growth model with a 3-year high growth rate period, a 3-year middle growth rate period, and a 3-year relatively low growth rate period. These rates were determined by assessing

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analysts’ estimates and comparable companies’ past performances, namely Yelp, LinkedIn, Twitter, Facebook, Shutterfly, and Google. The terminal year growth rate used was the long-term US GDP growth rate of 1.75%, forecasted by the OECD. Table  1.  Forecast  of  U.S.  GDP  growth  rate  

Table  2.  Growth  rate  of  Revenues  

Year 2014 2015 2016 2017 Growth rate Zillow 70.00% 55.00% 55.00% 30.00% Trulia 85.00% 70.00% 60.00% 35.00%

2018 2019 2020 2021 2022 2023

30.00% 30.00% 20% 10% 10% 1.75% 35.00% 35.00% 20% 15% 15% 1.75%

Trulia was given a higher growth rate based on the historical trend. The Property Plant and Equipment (PPE) was calculated using a fixed ratio of PPE/Sales determined by taking the average of the past 3 years’ PPE/Sales ratio. The Net Working Capital and depreciation were calculated using the same methodology capturing the past-3 year average for NWC/Sales and Depreciation/Sales, respectively. The EBIT was calculated using a fixed ratio of EBIT/Sales derived from the average of the past 3 years’ performance. The EBIT used differed from the EBIT reported in the companies’ Income Statements termed “Operating Loss” due to two adjustments. We expect positive net income to be achieved in the future. We adjusted EBIT by capitalizing the R&D expense and converting to capital expenses and by including the operating lease commitments as financial expenses, rather than operating expenses, and converting them to debt. 𝐹𝑖𝑛𝑎𝑙  𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑  𝐸𝐵𝐼𝑇

= 𝑁𝑒𝑡  𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔  𝐼𝑛𝑐𝑜𝑚𝑒 + 𝑅&𝐷 − 𝐴𝑐𝑐𝑢𝑚𝑢𝑙𝑎𝑡𝑒𝑑  𝐴𝑚𝑜𝑟𝑡𝑖𝑧𝑎𝑡𝑖𝑜𝑛+ (𝑃𝑟𝑒𝑇𝑎𝑥  𝐶𝑜𝑠𝑡  𝑜𝑓  𝐷𝑒𝑏𝑡 ∗ 𝑃𝑉  𝑜𝑓  𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔  𝐿𝑒𝑎𝑠𝑒𝑠)  

We incorporated Lease adjustment into (EBIT*/Sales) ratio, by:

𝐸𝐵𝐼𝑇 = 𝑁𝑒𝑡  𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔  𝐼𝑛𝑐𝑜𝑚𝑒 + 𝑅&𝐷 + (𝑃𝑟𝑒𝑡𝑎𝑥  𝐶𝑜𝑠𝑡  𝑜𝑓  𝐷𝑒𝑏𝑡∗ 𝑃𝑉  𝑜𝑓  𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔  𝐿𝑒𝑎𝑠𝑒𝑠)

0.00%  

2.00%  

4.00%  

2016   2022   2028   2034   2040   2046   2052   2058  

GDP  Growth  Rate  of    U.S.  

GDP  Growth  Rate  

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When data gaps surfaced, we used 80% of the previous year’s leasing adjustments compared to EBIT as an approximate. Amortization should not adjust taxes because capitalizing R&D does not affect taxes. The R&D operating expense was capitalized because R&D can be considered more of an asset (or an investment), for returns in the future, rather than an operating expense. Amortization of R&D was calculated on a 3-year schedule for the present year using the current industry average. The difference between the originally reported R&D total and the calculated amortization for that year was then added back to the capital expenditure total. Future R&D was calculated using an R&D/Sales ratio schedule derived from comparable industry competitors. Table  3.  R&D/  Sales  Schedule  

Year 2013 2014 2015 2016 2017 R&D/Sales for Zillow 24.0% 24.0% 24.0% 24.0% 22.0% R&D/Sales for Trulia 24.5% 24.5% 24.5% 24.5% 22.5%

2018 2019 2020 2021 2022 2023

22.0% 22.0% 20.0% 20.0% 20.0% 17.0% 22.5% 22.5% 20.0% 20.0% 20.0% 17.0%

We gave Trulia a relatively higher R&D/ Sales ratio based on historical trend. This is also consistent with its high growth rate. For the calculation of taxes, we considered the past year’s accumulated loss, which were calculated based on the EBIT/Sales ratio (not adjusted by lease), and we subtracted R&D out again to get the EBIT as the tax base. The Change in Capital Expenditure was calculated by taking the difference of PPE in the present year from the previous year. The difference between R&D and the accumulated amortization was added back to the EBIT. The Increase in NWC was calculated from the difference in NWC of the present year from the previous year. The discount rate was calculated using the Weighted Average Cost of Capital (WACC) formula. We used the current market cap as Equity, and book value of debt (adjusted by adding the converted lease commitments) as Debt.

𝐶𝑜𝑠𝑡  𝑜𝑓  𝐶𝑎𝑝𝑖𝑡𝑎𝑙 =  𝐸𝑉 ∗ 𝐶𝑜𝑠𝑡  𝑜𝑓  𝐸𝑞𝑢𝑖𝑡𝑦 + 1− 𝑡 ∗  

𝐷𝑉 ∗ 𝐶𝑜𝑠𝑡  𝑜𝑓  𝐷𝑒𝑏𝑡

𝐶𝑜𝑠𝑡  𝑜𝑓  𝐸𝑞𝑢𝑖𝑡𝑦 = 𝑅𝑖𝑠𝑘  𝑓𝑟𝑒𝑒  𝑟𝑎𝑡𝑒 + 𝑢𝑛𝑙𝑒𝑣𝑒𝑟𝑒𝑑  𝑏𝑒𝑡𝑎 ∗𝑚𝑎𝑟𝑘𝑒𝑡  𝑟𝑖𝑠𝑘  𝑝𝑟𝑒𝑚𝑖𝑢𝑚  

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We chose to use the 3-month government bond rates (virtually zero) as the risk free rate, and 5% as the market risk premium as suggested by Dr. Damodaran and other Economists for the current market. We compared Beta estimates of each firm from different financial websites, and choose the Beta listed on Zack’s Investment Research as it matched with Yahoo Finance’s estimate of Beta. We then “walked down” the Beta by 0.1 over 10 years in 3 stages, consistent with our growth stage schedule. We calculated unlevered beta using the formula:

𝑈𝑛𝑙𝑒𝑣𝑒𝑟𝑒𝑑  𝐵𝑒𝑡𝑎 =  𝐵𝑒𝑡𝑎

(1+ 1− 𝑡 𝐷𝑉 )

For the Cost of Debt we used the interest rate listed in the two companies’ financial reports, given as 2.75%. Table  4.  Beta    

Stage 1 Stage 2 Stage 3 Stable Stage Zillow Levered Beta 1.27 1.24 1.20 1.17 Zillow Unlevered Beta 1.26 1.23 1.19 1.16 Trulia Levered Beta 1.70 1.67 1.63 1.60 Trulia Unlevered Beta 1.56 1.53 1.50 1.47  

Table  5.  Cost  of  Capital  

Zillow 6.25% 6.09% 5.92% 5.76% Trulia 7.09% 6.96% 6.82% 6.69%

Table  6.  Zillow  Fundamental  Value  

VALUATION Year 2013 2014 2015 2016 Sales 197,545 335,827 520,531 806,823 PPE 27,408 44,015 68,224 105,747 NWC 10,510 17,928 27,788 43,072 Depreciation 23,254 38,102 59,058 91,540

EBIT* 32,957 77,625.56

120,319.6

2

186,495.4

1 Amortization 17,136 29,752 51,903 84,675 Taxes - - - - Depreciation 38,102 59,058 91,540

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Change in CAPEX 67,454 97,232 146,486 Increase in NWC 7,418 9,860 15,283 FCF 11,104 20,382 31,592 - - - - - - Discounted FCF-stage1 54,783 Discounted FCF-stage2 344,080 Discounted FCF-stage3 598,896 Sum of 9-year 997,759 Horizon Value 4,127,145 Enterprise Value 5,124,903 Debt 51,204 Cash 201,760 Equity 5,275,459 Number of Shares 40,120,000 Share Price not considering exec ops $131.49 option outstanding 13259985

$3,881,172,053.1

5 $1,394,287,422.7

5 Considering exec ops $96.74 Actual Price of 10/17/2014 $105.15

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19  Table  7.  Zillow  Fundamental  Value  Continued    

2017 2018 2019 2020 2021 2022 2023

1,048,870 1,363,531 1,772,590 2,127,109 2,339,819 2,573,801 2,618,843 137,470 178,712 232,325 278,790 306,669 337,336 343,239

55,993 72,791 94,628 113,554 124,909 137,400 139,805 119,003 154,703 201,114 241,337 265,471 292,018 297,128

242,444.03

315,177.24

409,730.41

491,676.49

540,844.14 594,928.56

477,938.83

133,054 183,105 241,455 306,899 371,789 427,785 469,382 - - - 3,166 18,095 19,905 47,751

119,003 154,703 201,114 241,337 265,471 292,018 297,128 129,421 158,113 202,128 164,987 124,053 117,642 (18,275)

12,921 16,798 21,837 18,926 11,355 12,491 2,405

86,050 111,865 145,424 239,035 281,021 309,124 273,805 128,005 147,217 190,211

- - - 267,230 326,648 359,313 273,805 6830935.355

Table  8:  Trulia  Fundamental  Value    

VALUATION Year 2013 2014 2015 2016 2017 Sales 143,728 265,897 452,025 723,239 976,373 PPE 22,289 35,714 60,713 97,141 131,140 NWC 8,679 18,080 30,735 49,176 66,388 Depreciation 12,211 17,915 30,455 48,729 65,784

EBIT* 11,020 42,473.60 72,205.11

115,528.18

155,963.05 Amortization 14,551 23,154 39,985 70,168 117,695 Taxes - - - - - Depreciation 17,915 30,455 48,729 65,784 Change in CAPEX 49,832 55,416 95,760 143,454 135,988 Increase in NWC 3,109 9,401 12,656 18,441 17,212 FCF (27,581) (45,741) (67,806) - - - (49,148) - - - -

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Discounted FCF-stage1 (120,838) Discounted FCF-stage2 (144,768) Discounted FCF-stage3 (6,706) Sum of 9-year (272,312) Horizon Value 2,805,776 Enterprise Value 2,533,463 Debt 230,135 Cash 225,597 Equity 2,528,925

Number of Shares

37,310,00

0 Share Price not considering exec ops $67.78 option outstanding 8512431

$2,155,82

5,289.20 373,099,851 Considering exec ops $57.78 Actual Share Price $43.83

Table  9:  Trulia  Fundamental  Value  Continued  

2018 2019 2020 2021 2022 2023 1,318,104 1,779,440 2,135,328 2,455,627 2,823,971 2,873,391

177,039 239,003 286,803 329,824 379,297 385,935 89,624 120,992 145,191 166,969 192,015 195,375 88,808 119,890 143,869 165,449 190,266 193,596

210,550.12 284,242.66 341,091.19 392,254.86 451,093.09 524,393.78 169,208 231,150 305,544 374,671 439,522 494,328

- - - - - - 88,808 119,890 143,869 165,449 190,266 193,596

173,264 231,187 169,322 159,475 174,746 (27,948) 23,236 31,368 24,198 21,779 25,045 3,360

(66,350) (89,573) - - (14,105) 1,779 2,046

248,249 5025331.756 4,644,717.64

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Appendix  B:  Explanation  of  Valuation  of  Synergies   According to Aswath Damodaran, “synergy is the additional value that is generated by combining two firms, creating opportunities that would not have been available to these firms operating independently.”xxx Our valuation of synergies is based on this theory. Zillow’s acquisition of Trulia is a horizontal merger with potential synergies falling under two main branches: operating synergies and financial synergies. Operating synergies allow the firm to increase its operating income by using existing assets. There are four types of operating synergies: economies of scale, greater pricing power, combination of functional strengths, and higher growth rates. Economies of scale allow the combined firm to become more cost-efficient and profitable. Greater pricing power from reduced competition and higher market share results in higher margins and thus, higher operating income. Combining of functional strengths across the businesses can also increase margins and operating income. Lastly, higher growth from increased brand recognition and an increased customer base can increase the combined firm’s profit.xxxi Potential financial synergies can be gained from higher cash flows or a lower cost of capital. Financial synergies include diversification, cash slack, tax benefits, and debt capacity. In some circumstances, an acquiring firm can reduce its risk and create wealth for shareholders by diversifying its holdings. Cash slack results in financial synergies wherein an acquiring firm has excess cash that can be put towards viable projects that the target firm was unable to undertake due to insufficient capital. Tax benefits may occur if the combined taxes paid by the merged firm are lower than the taxes paid by the individual firms. Finally, combining two firms with a low debt capacity may sometimes increase the debt capacity of the resulting firm.xxxii In order to determine the value of synergies present in the combined firm, we took the difference of the combined firm with synergies and the combined firms without synergies. To calculate the value of the combined firms with no synergies, we simply added the standalone values of the firms from our fundamental valuations. The value of Zillow’s and Trulia’s equities were added together and divided by the sum of their outstanding shares. Since Zillow shareholders are receiving a one-for-one exchange, Zillow’s shares outstanding were not adjusted. Trulia shareholders, however, will receive 0.444 shares of the combined firm per share of Trulia, so Trulia’s shares outstanding were adjusted to account for the exchange rate. This resulted in a share price of $106.50 for the combined firm without synergy.

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Table  10:  Value  of  Combined  Firm  without  Synergies    

Value of Combined Firm without Synergies Zillow Equity Value 3,881,172,053.15 Trulia Equity Value 2,155,825,289.20 Total Value 6,036,997,342.36 Number of share 56,685,640.00 Share price 106.50

Next, we considered operating synergies. We do not believe that the acquisition will impact our forecast of the online real estate advertising industry, so we did not include higher growth rates, longer growth periods, or a lower cost of capital in our valuations. However, we do expect that the acquisition will increase efficiency and generate cost savings. Of the potential financial synergies, we do not expect diversification or cash slack to be applicable, due to comparably similar cash/asset ratios of the two companies. The only financial synergy that we viewed as plausible was the potential for tax benefits, since Trulia has reported a net operating loss of -$39,429,000 over the last three years.xxxiii To incorporate these synergies into our valuation, we adjusted the cash flows of the combined firm beginning in 2016 using the following assumptions:

• Revenue growth rate: We used a weighted average of Zillow and Trulia’s growth rates in the fundamental valuation as the growth rates for the combined firm. The weighting was determined by the ratio of Zillow revenue to Trulia revenues from the past three years.

Table  11.  Growth  Rate  Weight  Calculation  

Year 2013 2012 2011 Average Revenues for Zillow 197,545 116,850 66,053 Revenues for Trulia 143,728 68,085 38,518 Zillow percentage of the total revenue 0.58 0.63 0.63 0.61

Table  12.  Growth  Rate  for  Combined  Company  

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Combined 75.79% 60.79% 56.93% 31.93% 31.93% 31.93% 20.00% 11.93% 11.93% 1.75%

• PPE/Sales ratio: We combined the PPE for the two firms and divided by the

combined sales of the two firms. This was done over the past three years and

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averaged to get the PPE/Sales ratio for future years. To incorporate operating synergies, we gave it a lower level schedule to indicate higher efficiency.

Table  13.  Average  PPE/Sales  Ratio    

2013 2012 2011 Average Zillow 13.87% 14.50% 10.94% 13.11% Trulia 15.51% 10.38% 14.40% 13.43% Combined 14.56% 12.99% 12.22% 13.26%  Table  14.  PPE/Sales  Schedule  

Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Schedule - 14% 13% 13% 13% 13% 13% 13% 13% 13%  

• Depreciation/PPE ratio: We combined the depreciation for the two firms and divided by the combined PPE of the two firms.

• EBIT/Sales ratio: We used the same method as we did for the PPE/Sales ratio. And walked down 1% to indicate improvement of efficiency.

• Net Working Capital/Sales ratio: We used the same method as we did for the PPE/Sales ratio for the first year, and began decreasing the ratio steadily to account for improved efficiency of the combined firm.

• R&D/Sales ratio: We used the same method as we did for the Net Working Capital/Sales ratio. This accounts for the improved efficiency from combining R&D for the two firms.

• Tax: Taxes were calculated the same way as for the independent firms, except we used the combined net operating losses.

• Management costs: We expect management costs due to merging the two companies. In 2015, we assigned this value to 50% of the General & Management cost, and in 2016, it was only 30%. General & Management Cost was calculated using the average ratio of M&A/Sales from the past three years.

• Cost savings: We took a weighted average of the two companies announcements of expected cost savings. Zillow expects $145 million in operating synergies by 2016, and Trulia expects $175 million.xxxiv We used the average revenues of the companies from the past three years to determine the weights.

• Cost of capital: We used Damodaran’s spreadsheet model and found the cost of capital to be as listed below:

Table  15.  Cost  of  Capital    

Zillow unlevered Beta Trulia Unlevered Beta Combined Cost of capital Stage 1 1.2604 1.5626 6.487% Stage 2 1.2273 1.5319 6.334% Stage 3 1.1942 1.5013 6.181% terminal 1.1611 1.4707 6.028%

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Incorporating these assumptions in the cash flows of the combined companies, we found a share price of $124.81 for the combined firm with synergies. Table 16 summarizes the equity value and share price of the combined firm with and without synergy. Thus, the value of synergy that the combined firm will have is $1.038 billion. Table  16.  Valuation  of  Synergies  

Equity Value Stock Price Without Synergy $6.040 billion 106.5 With Synergy $7.075 billion 124.81 Synergy Value $1.038 billion 18.31

 

Appendix  C:  Explanation  of  Different  Scenarios  for  Standalone  Companies   In considering the standalone future of the two companies, we evaluated four different scenarios: our fundamental valuation; a high-risk scenario; a low growth rate scenario; and a negative stable growth scenario. The fundamental valuation is our original valuation based on historical financial data, outlined in Appendix A. The other three scenarios adjust growth rates and cost of capital of our fundamental valuation to account for various expectations of the future of the industry.

Alternative  1:  High  Risk     Referencing Aswath Damodaran’s industry averages, the cost of capital for the internet services sector is 8.20% and the debt to value ratio for the industry is 4%. The average beta is 1.05. The average cost of capital for the real estate industry ranges from 6.33% to 8.70% depending on the sector. Lastly, the advertising industry reports a 7.64% cost of capital based on these estimates. In our basic valuation, Zillow’s cost of capital ranges from 5% to 6% while Trulia’s ranges from 6% to 7%. Both of these values are below the average cost of capital for internet services, but well within the range for real estate companies. However, since the basic valuation incorporated very high growth rates into their projections, we believe that this may necessitate using a higher risk premium. This is due to the risk of the companies not achieving the high growth rates. Thus, we added a 5% risk premium to the cost of capital for each company. (The 5% was determined as a comparable risk premium to adjacent internet companies and would be derived from adjustments to Beta, the risk free rate, and the market premium.) As a result, the share prices of each company significantly fell: Zillow’s share price was $33.19 under this scenario and Trulia’s was $20.21. In this scenario, both companies’ stocks are highly overvalued in the market.

Alternative  2:  Low  Growth   Our analysis of the online real estate advertising industry leads us to believe that there is a high possibility that the market is already close to saturation and that Zillow and Trulia

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will have lower growth rates in their revenues than accounted for in the fundamental valuation. For this reason, we incorporated a growth schedule with lower growth rates into our second alternative for the standalone companies. The schedules we used for the two companies are given below: Table  17.  Lower  Growth  Rate  Schedule  

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Basic Growth Rate for Zillow 70% 55% 55% 30% 30% 30% 20% 10% 10% 1.75% Lower Growth Rate for Zillow 60% 50% 40% 25% 25% 25% 10% 10% 10% 1.75% Basic Growth Rate for Trulia 85% 70% 60% 35% 35% 35% 20% 15% 15% 1.75% Lower Growth Rate for Trulia 70% 60% 50% 25% 25% 25% 10% 10% 10% 1.75% We held all other variable constant when adjusting for the growth rates. As a result, both companies’ stocks fell. Zillow’s resulting share price was $62.93, and Trulia’s share price was $26.49. This indicates that if growth rates are lower than expected, both companies’ shares are overvalued in the market.

Alternative  3:  Negative  Stable  Growth   Our final alternative also rests on our assumptions about the future of the industry. We believe that there is a possibility that the companies will be able to grow at high speed in the near-term future, but within ten years, the poor design of their revenue streams will inhibit further growth. In fact, the companies could actually see a decline in their revenues past this point. In this model, we changed the 1.75% growth rate used in the terminal stage of the fundamental valuations to -2.00%. This accounts for a decline in advertising revenues. Holding all other variables constant, this change results in a $48.55 share price for Zillow and a $26.72 share price for Trulia. Once again, both companies’ share prices are severely overvalued in the market given these assumptions. The results of our three alternative scenarios are shown below in comparison with the fundamental valuations used as our baseline. Both companies are sensitive to these adjustments, as each of the three scenarios negatively impacts the value of the firms.  

 

 

 

 

 

 

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26  Figure  1:  Stand-­‐alone  Scenarios    

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Notes                                                                                                                    i  “Zillow Announces Acquisition of Trulia for $3.5 Billion in Stock.” Zillow, Inc. 28 July 2014. Web. 15 Oct. 2014. ii Zillow, Inc. 28 July 2014. iii Historically, shareholders in acquiring firms have been losers. A 2003 study by Moeller, Schlingemann, and Stulz (2003) finds that regardless of merger terms (cash versus stock or a combination thereof), shareholders of large acquiring firms most often see their wealth eroded. Over a twenty year period they find that mergers and acquisitions in the US had resulted in a loss of $226 billion but during this same period, shareholders of small cap firms reaped increases in wealth. The current cheap money environment of 2014 points to a pivot in this trend. with recent evidence finding that mergers may not be value destroying. However, if this trend has indeed reversed, it may be due more to lower and perhaps miss-specified costs of capital used in discounting future cash flows than in acquiring firms being more savvy today than was the case in the past. In fact, the evolution of the industry in which Zillow and Trulia operate is critical to the success of the merger. As we describe later, industry trends are not promising so ultimately the merger may fail. iv “Control Premium Study 2013.” RSM Bird Cameron. 2013. Web. Page 4. 28 Oct. 2014. v “Trulia, Inc. Merger Litigation.” Brodsky & Smith, LLC. 2014. Web. 2 Nov. 2014. vi Romano, Roberta. “Question for [Sterling Professor of Law and Director, Yale Law School Center for the Study of Corporate Law] you.” 21 Oct. 2014. vii Alpert, Bill. “Zillow’s Shares Could Fall By Half.” Barron’s Online, 9 Aug. 2014. Web. 20 Oct. 2014. viii “Zillow Audience.” Zillow, Inc. 2014. Web. 24 Oct. 2014. ix Alpert, 2014. x Thompson, Derek and Jordan Weissmann. “The Cheapest Generation: Why Millennials aren’t buying cars or houses, and what that means for the economy.” The Atlantic. 22 August 2012. Web. 27 Oct. 2014. xi Kolko, Jed. “The Recession’s Lost Generation of Home Owners Isn’t the Millennials – It’s the Middle-Aged.” Trulia, Inc. 16 July 2014. Web. 29 October 2014. xii “Trulia: Problems with real estate listings info are pervasive.” Inman. 5 Oct. 2011. Web. 24 Oct. 2014. xiii Cook, John. “This real estate vet is sick and tired of Trulia and Zillow, and he’s not going to take it anymore.” GeekWire, 31 Jan. 2012. Web. 26 Oct. 2014. xiv “ARG is not all wrong about Zillow and Trulia.” RealtyV2. 2014. Web. 26 Oct. 2014. xv Holan, Mark. “Why you might want to think twice before trusting Zillow’s estimated value of your home.” Washington Business Journal. BizBeat, 9 May 2014. Web. 23 Oct. 2014. xvi Cook, 2012. xvii Alpert, 2014. xviii Yoder, Steve. “Zillow and Trulia Face Backlash from Realtors.” The Fiscal Times, 24 Feb. 2012. Web. 24 Oct. 2014. xix Henrich, Gena. “Edina Realty pulls its real estate listings from third party aggregators.” Edina Realty. 18 November 2011. Web. 26 Oct. 2014.

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                                                                                                                                                                                                                                                                                                                                         xx Hammond, Grant. “The Great MLS Listing Syndication War.” Nashville Real Estate. 14 February 2012. Web. 30 Oct. 2014. xxi Alpert, 2014. xxii Alpert, 2014. xxiii Alpert, 2014. xxiv Fundamental valuation depends on projected free cash flows and the discount rate applied to the cash flows. To support our belief that growth rates are overly optimistic, we used two approaches. First, we accounted for this impact by maintaining the growth rates and adding a risk premium to the cost of capital. Second, we kept the original cost of capital and adjusted growth rates. xxv Floro, Zachry. “It would be a bad, bad thing if Facebook tried to charge users.” Business Insider. 26 July 2012. Web. 29 Oct. 2014. xxvi Alpert, 2014. xxvii “Zillow, Inc. (NAS:Z) Short Percentage of Float.” Gurufocus. 3 November 2014. Web. 3 Nov. 2014. xxviii Jannarone, John. “Trulia and Zillow insiders sold shares before merger report.” CNBC. 24 July 2014. Web. 3 Nov. 2014. xxix Star, Marlene Givant. “Recent M&A Positive for Acquirer’s Share Prices.” Forbes. 13 March 2013. Web. 1 November 2014. xxx Damodaran, Aswath. “The Value of Synergy.” Stern School of Business. October 2005. xxxi Damodaran, 2005. xxxii Damodaran, Aswath. “Acquisition Valuation.” Damodaran Online. 2014. Web. 18 Oct. 2014. xxxiii Trulia, Income Statement. Operating Loss (2011-2013). xxxiv “Zillow, Trulia Management See Upside in Combined Company – RBC Capital (Z) (TRLA).” StreetInsider.com. 19 September 2014. Web. 27 October 2014.                                  

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BIBLIOGRAPHY  

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                                                                                                                                                                                                                                                                                                                                         Kolko, Jed. “The Recession’s Lost Generation of Home Owners Isn’t the Millennials – It’s the Middle-Aged.” Trulia, Inc. 16 July 2014. Web. 29 October 2014. Miller, Peter. “Will the Zillow-Trulia union change real estate?” RealtyTrac. 30 July 2014. Web. 28 Oct. 2014. Moeller, Sara B., Fredrick P. Schlingemann and Rene M. Slutz. “Do shareholders of acquiring firms gain from acquisitions?” NBER Working Paper No. 9523. March 2003. NBER Programs. 31 Oct. 2014. Romano, Roberta. Question for [Sterling Professor of Law and Director, Yale Law School Center for the Study of Corporate Law] you. 21 Oct. 2014. Star, Marlene Givant. “Recent M&A Positive for Acquirer’s Share Prices.” Forbes. 13 March 2013. Web. 1 November 2014. Thompson, Derek and Jordan Weissmann. “The Cheapest Generation: Why Millennials aren’t buying cars or houses, and what that means for the economy.” The Atlantic. 22 August 2012. Web. 27 Oct. 2014. Timiraos, Nick. “Do ‘Boring’ Explanations Explain Weak Millennial Homeownership?” The Wall Street Journal. 24 July 2014. Web. 27 Oct. 2014. Townsend, Daniel. Real Estate, Writing, and Beyond. n.d. Web. 29 Oct. 2014. “Trulia, Inc.” Google Finance. 2014. Web. 22 Oct. 2014. Trulia, Inc. Trulia 2013 Annual Report on Form 10-K, 2014. Web. 16 Oct. 2014. “Trulia, Inc. Merger Litigation.” Brodsky & Smith, LLC. 2014. Web. 2 Nov. 2014. “Trulia: Problems with real estate listings info are pervasive.” Inman, 5 Oct. 2011. Web. 24 Oct. 2014. “TRLA Q3 2014 Operating Metrics.” Trulia, Inc. 2014. Web. 25 Oct. 2014. Yoder, Steve. “Zillow and Trulia Face Backlash from Realtors.” The Fiscal Times, 24 Feb. 2012. Web. 24 Oct. 2014. “Zillow Announces Acquisition of Trulia for $3.5 Billion in Stock.” Zillow, Inc. 28 July 2014. Web. 15 Oct. 2014. “Zillow Audience.” Zillow, Inc. 2014. Web. 24 Oct. 2014. “Zillow, Inc.” Google Finance. 2014. Web. 22 Oct. 2014.

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                                                                                                                                                                                                                                                                                                                                          “Zillow, Inc. (NAS:Z) Short Percentage of Float.” Gurufocus. 3 November 2014. Web. 3 Nov. 2014. Zillow, Inc. Zillow 2013 Annual Report, 17 Apr. 2014. Web. 16 Oct. 2014. Zillow, Trulia Management See Upside in Combined Company – RBC Capital (Z) (TRLA).” StreetInsider.com. 19 September 2014. Web. 27 October 2014.