Activist Dan Loeb dusts off his poison pen as he seeks a board refresh at

Company: CoStar Group Inc (CSGP)

Business: CoStar Group engages in the provision of online real estate marketplaces, information, and analytics in the commercial and residential property markets. It operates through the following segments: CoStar Portfolio, Information Services Portfolio, Multifamily Portfolio, LoopNet Portfolio and Other Marketplaces Portfolio. The CoStar Portfolio segment consists of two classes of trade receivables based on geographical location: North America and International. The Information Services Portfolio segment includes four classes of trade receivables: CoStar Real Estate Manager; Hospitality, North America; Hospitality, International; and other Information Services. The Multifamily Portfolio, LoopNet Portfolio and Other Marketplaces Portfolio segments focus on one class of trade receivables. The company was founded by Andrew Florance and Michael Klein in 1987 and is headquartered in Arlington, Va.

Stock Market Value: $26.07B ($61.50 per share)

Ownership: 0.71%

Average Cost: n/a

Activist Commentary: Third Point is a multi-strategy hedge fund founded by Dan Loeb, that will selectively take activist positions. Loeb is one of the true pioneers in the field of shareholder activism and one of a handful of activists who shaped what has become modern-day shareholder activism. He invented the poison pen letter in a time when it was often necessary. As times have changed, he has transitioned from the poison pen to the power of the argument. Third Point has amicably gotten board representation at companies like Baxter and Disney, but the firm will not hesitate to launch a proxy fight if it is being ignored.

What’s happening

On Jan. 27, Third Point sent a letter to the CoStar board calling on them to (i) replace a majority of the board and align management compensation to total shareholder return; (ii) consider strategic alternatives for Homes.com and related residential real estate (RRE) businesses; and (iii) refocus on the core commercial real estate (CRE) business. Third Point was previously bound by standstill restrictions following a settlement for board seats last year, which expired on Jan. 27. The firm now plans to nominate a new slate of directors.

Behind the scenes

CoStar Group (CSGP) is a provider of online real estate marketplaces, information, and analytics in the property market. It manages major brands including CoStar Suite, LoopNet, Apartments.com and Homes.com. Approximately 95% of the company’s revenue is derived from its core commercial real estate (“CRE”) franchises, which largely consists of CoStar Suite and Apartments.com. These businesses benefit from high barriers to entry, strong pricing power, proprietary data and subscription-based business models that drive recurring revenue and highly predictable free cash flow. Because of these dynamics, this business has historically traded at a premium to its Information Services peers but is now trading in line with them.

This regression in the company’s valuation…