Daniel Loeb’s hedge fund Third Point has walked away from its activist campaign against CoStar Group, selling its entire position in the real estate data company after concluding that its original investment thesis no longer held, according to a letter to investors.
Third Point had signaled in January that it would pursue a board challenge at CoStar — its first activist campaign in three years — seeking to force the company to change directors and restructure operations. At the time, the fund demanded CoStar exit its residential business entirely, suggesting the company fold Homes.com and refocus on its core commercial real estate operations, moves that came after what Third Point characterized as a year of unmet promises.
The retreat marks a significant reversal. Third Point acknowledged that its strategy to realign CoStar’s focus on core operations would not be effective, particularly as the company’s shares have dropped more than 50% over the past year.
“We no longer believe that our original thesis holds true today and have disposed of our position in its entirety,” Mr. Loeb wrote in the investor letter. The fund never disclosed the size of its stake in CoStar, the owner of Apartments.com and Homes.com.
The hedge fund changed course after it became clear to Mr. Loeb and his team that their plans to pressure the company into focusing more squarely on its core business might not salvage the company after all.
Third Point and multi-strategy hedge fund D.E. Shaw had previously struck a deal to avert a proxy fight, but that agreement expired in January, prompting Mr. Loeb to announce plans to replace a majority of CoStar’s board and take aim at the chief executive’s compensation packages.
Third Point had previously obtained board representation at companies including Baxter and Disney through amicable negotiations, though the firm had signaled it would not hesitate to launch a proxy fight if its concerns were ignored. The decision to exit entirely rather than press forward suggests the fund saw little prospect of recovering value through continued engagement.
By: DNU staff