CoStar (CSGP) is under pressure from activist investor Third Point, which is calling for a major board shake-up and strategic overhaul following years of weak performance in its residential real estate segment.

Third Point, which manages $24 billion in assets, sent a letter to CoStar's board accusing management and directors of misaligned incentives, poor governance and billions of dollars in misallocated capital tied to the company's Homes.com business.

In the letter, Third Point founder Daniel Loeb said CoStar's stock has fallen 27% over the past five years, compared with a 94% total return for the S&P 500.

The firm called on the board to replace most directors, tie executive pay to total shareholder return, and eliminate ongoing losses, warning that immediate action is required to protect shareholder value and restore credibility. The firm said it plans to nominate new directors to improve governance, the asset manager said.