Zillow extends 3-day plunge to 39% as the company abandons its home-flipping business amid housing-market pressure

• Shares of Zillow extended their three-day plunge as the company abandoned its home-flipping business.
• From last Friday's close of $103.63 to Wednesday's intraday low of $63.13, the stock has slipped 39%.
• "ZG is exiting a very risky and unprofitable business but it raises questions on management's execution," Bank of America said.

Shares of Zillow extended their three-day plunge as the company abandoned its home-flipping business amid housing-market pressures.

Rich Barton, CEO and cofounder of Zillow, made the announcement after market hours Tuesday during the company's third-quarter earning's call. He also said Zillow is laying off 25% of its workforce.

The stock fell as much as 28% on Wednesday alone, extending its three-day loss to 39%. Zillow shares are now down 33% year-to-date.

Zillow's instant-buying or iBuying division - which enabled the company to quickly buy up homes for sale and flip them at a profit - was disrupted by the volatility of the pandemic, when big demographic shifts made it very difficult to predict the short term trajectory of house prices.

Insider's analysis found that the company listed around 64% of its homes in key markets for less than these were purchased for. This overpaying has been most evident in Dallas, Houston, Phoenix, Minneapolis, and Atlanta - five of its biggest markets.

Zillow said it was unable to sell its housing inventory for a consistent profit despite home prices surging to record highs. On October 18, it announced it would pause iBuying for the rest of 2021. Not long after, on November 2, the company said it would shutter the division.

Its CEO admitted that Zillow could not master developing an algorithm and acquisition process that could reliably predict the trajectory of the nation's housing market. The wind-down of the business, founded in 2004, will take "several quarters," he added.

The recent news will have adverse effects on the $20 billion property technology firm, which had previously hinged its future growth on iBuying.

"ZG is exiting a very risky and unprofitable business but it raises questions on management's execution and judgment on capital allocation," Bank of America said in a note on Wednesday. "We have been cautious on the iBuyer business."