The technology-powered real estate brokerage Compass launched its initial public offering Thursday closing its first day of trading at $20.15 per share, around 12% higher than its IPO price.
Compass priced its stock at $18 per share, at the low end of its target range of $18 and $19. That range itself had been revised downwards last week from an initial range of between $23 and $26.
The company’s shares began the day trading at $21.25, about 22% higher than its IPO price. Altogether, Compass raised $450 million from the IPO, it said.
In an interview with Crunchbase, Compass Chief Executive Robert Reffkin said he was pleased with the stock performance on the first day of trading. “We met our goal,” he said. “The goal wasn’t a price or a valuation, the goal was raising a certain amount of capital to fund the business.”
Compass operates similarly to most traditional real estate brokerages, but it sets itself apart by providing a suite of digital tools its real estate agents can use to better market themselves and their listings. Its customer relationship management platform provides, among other things, tools to make videos, ads, and newsletters.
Reffkin said he was inspired by his mother, who has decades of experience as a real estate agent. She now works with Compass, he told Crunchbase.
“I saw at a young age that, on one hand, she’s an entrepreneur, and all agents are … but on the other hand, they’re an underserved customer base,” Reffkin said. “I saw her struggle because she didn’t have the tools she needed.”
When asked about whether Compass sees itself as a real estate company or a tech platform, Reffkin said it sees itself as helping agents to be successful, which it primarily does through its technology platform. He said that most traditional brokerages provide very limited tech support, and the average agent uses 9 different software platforms to do their job. He said Compass is to real estate agents what Shopify is to online sellers.
“If you’re a merchant, you can get everything you need from Shopify,” Reffkin said. “Agents need and deserve the same.”
Compass pulled in a huge amount of venture capital before its IPO that allowed it to grow its business while running at a loss. Its most recent funding round was a $450 million investment in 2019 led by SoftBank Group’s Vision Fund.
The company’s next task is to try and achieve a profit, and luckily for investors it does seem to be on the way to achieving that goal. Its IPO filing revealed that it lost $270.2 million in 2020, down from a loss of $388 million in 2019.
Compass Co-founder is worth $500 million after IPO
Nine years after its founding, real estate brokerage Compass went public on Thursday, minting a huge windfall for the company’s investors and employees. As of early afternoon Eastern Time, cofounder and CEO Robert Reffkin was worth more than $500 million, Forbes estimates.
“I don’t think I ever thought about selling shares,” Reffkin said in an interview on Thursday. “This is what I expect will be the lowest valuation we’ll ever see.”
Fueled by over $1.5 billion in funding, including from WeWork backer SoftBank, Compass has ballooned into a giant with 19,000 agents and $3.72 billion in 2020 revenue. That growth has incurred big losses: $270 million last year and $388 million in 2019.
Since the company’s founding, Compass agents have closed more than $300 billion worth of deals from more than 275,000 homebuyers and sellers, the company reports. Compass holds a 4% share of the national brokerage market—which is traditionally highly fragmented—making it the largest independent brokerage as measured by gross transaction volume.
Investors are betting that Reffkin can turn Compass profitable in the coming years, and they are paying him handsomely to try. His total compensation in 2020 clocked in at $69.3 million, according to corporate filings, including performance and incentive-based awards.
Prior to Compass, Reffkin worked as White House Fellow in the Department of the Treasury, then spent six years at Goldman Sachs. He eventually rose to become chief of staff to the firm’s president and chief operating officer.