A lawsuit filed in federal court on November 16 alleges Zillow illegally failed to disclose to shareholders that it was struggling to accurately predict home prices for its house-flipping business, which ultimately led the company to shutter the operation this month. The suit, filed on behalf of shareholder Dibakar Barua, alleges that “misstatements and/or omissions” by Zillow executives drove up Zillow share prices that later plummeted when the company announced it would shut down Zillow Offers.

Seattle-based Zillow said two weeks ago that it was shutting down Zillow Offers, the company’s attempt at iBuying, an algorithm-driven version of house-flipping. At the same time, Zillow said it would lay off a quarter of its staff. The company had thousands of homes it still needed to resell, many likely at a loss. Zillow reported a loss of $328 million in the third quarter, a loss of $1.29 per share. “Fundamentally, we have been unable to predict future pricing of homes to a level of accuracy that makes this a safe business to be in,” CEO Rich Barton said during an earnings call Nov. 2.  Zillow shares sank 23% the next day, closing at $65.86, down from more than $100 the previous week. Shares closed at $62.72 on Tuesday.

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