The Redfin and Rocket $1.7 billion acquisition, expected to close in the next two quarters, just had more drama added to the potential power shift in the “portal wars.”
Redfin investor Bruce Miller is suing the company, along with its board, in New York state court, alleging that Redfin misled investors by omitting financial details of both companies and the merged businesses. Further, Miller claims that Goldman Sachs, which served as an advisor on the deal, failed to disclose its conflict of interest of how much the bank will gain as a result of the deal.
According to court filings, Miller seeks to prevent the merger before the June 4 shareholder vote. If the deal gets the green light, Miller will seek rescission or will pursue compensation for damages. He alleges negligence and concealment, claiming that Redfin failed to “communicate accurate and truthful information” as it closed the deal.
On the same day Miller filed the suit, law firm Halper Sadeh—which specializes in aid to defrauded investors—announced its investigation into the sale and whether 0.7926 shares of Rocket Companies Class A common stock for each share of Redfin common stock is fair to Redfin shareholders. Miller is not represented by Halper Sadeh in the lawsuit.
The deal, which would represent a significant re-balancing in the jostling between big consumer-facing companies like Zillow, Homes.com and Realtor®.com, was expected to close by Q3 of this year, with a shareholder vote on June 4. Miller is asking that to be postponed until parties “(disclose) the material information discussed above which has been omitted.
“Plaintiff will be irreparably harmed because he will be stripped of his ability to make an informed decision with respect to the (Rocket acquisition), and his interest in Redfin will be damaged without proper and fully informed collective action by Redfin’s investors,” the filing read.
Specifically, Miller claims that Goldman Sachs, which advised on the deal, had “potential conflicts of interest” which were not adequately disclosed, and additionally that Redfin and Rocket did not accurately or fully represent financial conditions leading up to the deal. That included Redfin’s “assumptions regarding the potential impact of more challenging macroeconomic conditions than previously anticipated.”
Goldman Sachs also stood to benefit or potentially lose money on the deal, which was disclosed, but Miller said the company should have disclosed an estimate of how much, and that the parties should have disclosed a “summary” of materials provided by Goldman Sachs to the parties regarding the “potential effects” of the merger for Goldman.
“When an advisor stands to earn fees through a separate financial deal if a proposed transaction is completed, this incentivizes the advisor to push a transaction through regardless of its merits—creating a serious conflict of interest that compromises the independence of the advisor’s advice,” Miller wrote.
Representatives of Rocket and Redfin did not immediately respond to requests for comment. Miller and his lawyer could not immediately be reached for comment.
Q1 earnings
The lawsuit was filed the day before Redfin reported earnings for Q1 of this year, declining to hold a conference call ahead of the planned acquisition.
“Since the March 10 announcement of Redfin’s agreement to be bought by Rocket, many Redfin employees, from agents to engineers, have been over the moon about Rocket’s vision of a homeownership platform,” said Redfin CEO Glenn Kelman in the company’s earnings press release. Kelman is currently set to retain his role following the acquisition. “We can’t wait to join Rocket and build the future of homeownership.”
Looking backwards during Q1 2025, Redfin posted $221 million in revenue, a 2% drop compared to Q1 2024. Gross profit was $70.6 million (flat year-over-year), while net loss increased year-over-year from $66.8 million to $92.5 million. Redfin’s adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) loss in Q1 2025 was $32 million, compared to $27.6 million in Q1 2024.
Kelman described the financial results as, “at the high end of the guidance we gave investors in our last earnings call.” In Q4 2024, Redfin had projected total revenue between $214 million and $225 million and a net loss between $83-94 million.
During the quarter, Redfin recruited 360 new agents, and brought Lead Agent (separate from independent contractor Associate Agents) count up to a quarter-long average of 2190, a 32% increase year-over-year. (At the end of March 2025, Lead Agent count was 2265.) The earnings call press release attributed these results to the ongoing success of Redfin Next—a program which offered Redfin agents a more standard commission compensation structure, as opposed to the company’s traditional (but industry non-standard) practice of recruiting agents as salaried and benefit-enjoying employees.
Higher-than-anticipated commission payouts to Redfin Next agents were described as a contributing factor to Redfin’s net loss of $36 million during Q4 2024. These results motivated Redfin’s “cost-optimization strategy,” discussed during its Q4 2024 earnings call in February 2025, where the company announced layoffs of both rent professionals and senior personnel as well as slashing of agent benefits such as vacation pay.
On the consumer side, Redfin noted increased loyalty sales during Q1 2025—40% of sales came from repeat customers, compared to 35% in Q1 2024. Mortgage cross-selling was up slightly as well year-over-year, with the attach rate going from 28% to 29%.
While the Rocket acquisition is the biggest change in Redfin’s future, the company also announced a $10 million partnership with Zillow during Q1 2024. This deal would allow Zillow to post multifamily rental listings on Redfin’s site with the goal of boosting traffic.
“The partnership gives Redfin visitors access to one of the fastest-growing databases of rental listings and is expected to drive long-term profits for our rentals business,” said the Redfin earnings release about the Zillow partnership. Rocket CEO Varun Krishna has expressed support for the Redfin and Zillow deal, so Rocket’s acquisition of Redfin should not interfere with the deal’s implementation.
Rocket Companies is set to present its first-quarter earnings Thursday.
This is a developing story. Stay tuned to RISMedia for updates.