Accounting Probe Freezes Homestore Stock

Less than a month after its chief financial officer resigned, troubled online real estate play Homestore.com Inc. said it “will restate certain of its financial statements” as the audit committee conducts an inquiry into the company’s accounting practices.

And now the Nasdaq won’t let the company’s stock resume trading until Homestore.com has “fully satisfied” Nasdaq’s request for additional information.

The Westlake Village, Calif.-based company, long heralded by Wall Street as one of the few survivors of the dot-com shakeout, issued a brief statement after the market closed on Friday announcing the accounting probe and saying that it has alerted the Securities and Exchange Commission.

Homestore’s announcement gave no specific reason for the accounting probe, but published reports said that it likely involves how the company accounted for revenues from long-term advertising contracts, possibly posting the bulk of the revenues up front.

In October Homestore announced a major restructuring including a 20 percent workforce reduction and in early November the company posted a whopping net loss of $106.6 million, or 96 cents per share. On a pro forma basis, the company posted a 6 cents per share loss, or $6.9 million — double Wall Street’s loss expectations, according to First Call estimates.

The company’s stock had begun to crawl back after dropping into the $2 a share range, and Friday closed up 34 cents at $3.60.

All this bad news came after several quarters of being pegged by analysts as one of the industry’s most recession-resistant players – last March, Goldman, Sachs, for one, upgraded the stock to its highest rating, calling it the “closest to a defensive play in the Internet sector.”

Homestore’s network of Web sites includes the flagship Realtor.com; HomeBuilder.com; Homestore Apartments & Rentals; and Homestore.com, a home information resource.