Six companies in the online real estate sector were served with CID's by the United States Department of Justice last Friday morning, according to sources with the Wall Street Journal and Dow Jones Interactive. CIDs are civil information demands - subpoenas. The companies served are all going to be asked to share their records, information and testimonies at some point in Washington's continuing investigation of Homestore. What affect will the investigation have on Homestore, its stock and its planned merger with Move.com?

Some of the companies contacted by Realty Times could not be reached for comment to confirm if they were, in fact, served by the DOJ. Howard Latham, COO of VISTAinfo says they were not served and could not comment further. Others who were reached, see the CID servings as a non-event. If the anti-trust investigation of Microsoft is any indication of things to come, Homestore has little to fear for years to come. CIDs were served to Microsofts' competitors in 1995. It took another five years for a court ruling against Microsoft, and even then, the software giant refused to bend and promptly filed an appeal. And what is Homestore's worst case scenario anyway? That they nullify their Gold Alliance agreements? By then, will it matter anymore?

Said one pundit, "Everyone knows that the investigation of Homestore has gone on for a while. CIDs floating around are nothing new." A CID may be no more than a headache for Homestore, but they can be a migraine to the other companies dragged into the investigation.

HomeSeekers' president, John Giaimo, did confirm that HomeSeekers had been served. "We have turned the matter over to our law firm to help walk us through it," said Giaimo. "A CID is an involved process, and there is a whole laundry list of things they want responses to. There will also be a process that we will have to go through in Washington,.D.C. to testify before the DOJ."

Giaimo declined further comment saying only "There is a new full disclosure regulation from the SEC which went into effect Oct. 24th so we are looking into how to comply with that," he explained. "In the old days you had to think twice about what you say in public. Now you have to think a half dozen times."

But the timing couldn't be more inconvenient for Homestore, as company executives prepare for a busy week entertaining stock analysts on Wednesday and attending the REALTORS Conference and Expo in San Francisco throughout the remainder of the week. The company has just announced its proposed merger with Move.com in which Homestore will trade fifteen percent of its company to get to the assets and brands of Cendant's online spin-off, Move.com.

Ted Deutsch, director of public relations for Move.com, is unshaken by the news that other companies have been served with requests for information. "Our experts on this were not taken aback or intrigued by the fact that there are CID requests out there," says Deutsch.

He explains that CID requests are not unusual, and doubts that the requests have anything to do with the pending merger. Merging publicly held companies routinely supply the government with disclosures to comply with the Hart-Scott-Rodino Act, an anti-trust act which sets the rules companies must follow when merging with or acquiring other companies. "Move.com is in HSR review, but that doesn't include a CID request, so chances are we are uninvolved with that," says Deutsch. "The investigation of Homestore predated our transaction, and we are highly confident that our transaction will come to fruition."

"We have already been talking to the government, so there is nothing new to report," he concludes. "We remain confident that we will go through the regulatory process and close the transaction."

Jim Fowler is an analyst with Thomas Weisel Partners who follows Homestore. He said, "It's been disclosed frequently that the DOJ is investigating and they are looking into the various relationships between Homestore and MLS organizations and Homestore and brokers, as well as the NAR. My sense is that this doesn't have anything to do with Cendant and Move.com. Both of these parties would have thought through this transaction and that this is the next step in the investigation and who knows what will result? But it is not incrementally new information."

"Most people are looking at HOMS and the business it is putting in place as a series of very positive developments," says Fowler. "At the end if something were to change to impact the business of homestore that could impact the stock. I look at it as continued information requests, and there is nothing to indicate otherwise at this point. We are relying on management to give us information on the course of the situation."

So far investors have reacted favorably to the proposed merger. Since making the announcement, Homestore shares have soared more than 25 percent.

"In the new economy, people are looking for three things - big ideas addressing big markets and a competitive advantage. Homestore meets all three criteria," says Fowler.

Published: November 6, 2000

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