Over the same period, REA’s market valuation has plunged more than $7 billion from its record high in February as investors get to grips with the prospect of real competition.
CoStar has added well over $4 billion in value over the same period, which would at least partly reflect the group’s golden opportunity with a chronic underperformer such as Domain in a lucrative two-horse race.
When Domain listed in 2017, it was valued at a quarter of the market capitalisation of REA. If it had kept pace with this metric, Domain would have been worth about $8 billion now, not the $2 billion it was valued at before the CoStar offer.
What does a giant like REA have to fear from CoStar and its larger-than-life founder, Andy Florance?
Now let’s get this out up front. CoStar denies that Florance wielded his black semiautomatic pistol during a video meeting with executives from his home in rural Virginia in 2020 – as reported by Business Insider.
“Andy Florance is a well-trained and licensed shooter who is passionate about firearm safety,” a spokesman says.
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CoStar also takes issue with Business Insider’s reports, based on interviews with dozens of former employees, detailing Florance’s unflinching drive for domination of rivals. This included allegations of a workplace driven by relentless surveillance, humiliation and abrupt firing of employees who did not meet exacting standards.
“It grossly mischaracterises the employee experience within CoStar Group and the commitment of our leadership team to provide a respectful and professional work environment that benefits our 6600 employees and all those we serve,” the CoStar spokesman said in response to the report.
The most telling allegation from Business Insider’s account was of Florance’s dogged determination to win.
At a sales event in 2008, Florance reportedly unveiled a caged gerbil called Doug – named after Doug Curry, the head of rival operator Xceligent.
Florance claimed that the gerbil would live longer than Curry’s tenure at the rival group.
In 2017, Xceligent went bankrupt after losing a legal battle against CoStar.
Putting these allegations to one side, the one fact that matters is that Florance has built CoStar into a $53 billion business, starting from the basement of his father’s home in the 1980s.
It is fair to say that, if a binding offer is made and accepted for Domain, REA faces a brutal shake-up of its lucrative business, which currently operates more like a monopoly than a duopoly.
REA’s domination is so overwhelming that analysts at Morningstar suggest increased competition from CoStar would allow REA to increase prices even further without regulatory scrutiny.
As for Nine, the question is, what would it do with the $1.4 billion it would pocket from a successful Domain sale after tax?
The cash is expected to be shared with investors, pay down debt and provide financial firepower for organic growth opportunities and acquisitions.
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The challenges for Nine’s management is simple: how much cash will investors demand?
And how does Nine convince shareholders that a company which struggled to succeed with a property duopoly can be trusted to invest in the far more competitive media sector?
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