Robert Reffkin, CEO of Compass, speaks on stage in New York City on November 6, 2019.
Brad Barket | Getty Images
Compass, a real estate brokerage firm with more than 19,000 real estate agents across the country, filed on Monday to go public, telling potential investors that revenues were up 56% last year as house prices soared.
Founded in 2012, the New York-based company has sought to bring cutting-edge technology to brokers, giving them better data, marketing tools, and client relationship software than they can get from a typical physical brokerage.
Compass is one of several technology-driven real estate companies that are taking advantage of a flood of venture capital money that has allowed emerging companies to grow rapidly while burning money. Sales rose from $ 2.4 billion in 2019 to $ 3.7 billion last year, but the company spent 88% of its sales on commissions and “ other transaction-related costs. ”
Net loss for the year decreased to $ 270.2 million from $ 388 million in 2019 and its cash and cash equivalents shrank 20% to $ 440.1 million.
Compass was last valued at approximately $ 6.4 billion in a 2019 funding round led by SoftBank’s Vision Fund, which also invested in office rental company WeWork, home flipping site OpenDoor and construction technology company Katerra. OpenDoor went public through a reverse merger late last year and is now worth more than $ 17 billion, while WeWork is still trying to bounce back from a near collapse in 2019. SoftBank owns 35% of Compass Class A shares.
Residential real estate has been a booming market for the past year, driven by Covid-19 and the lockdowns forcing people to work from home. Realizing that remote working is here to stay, homeowners have looked to move to more desirable locations, but the new offering was limited, pushing prices up.
According to the S&P CoreLogic Case-Shiller Home Price Indices, house prices rose 10.4% nationally in December compared to a year earlier. That’s the strongest annual growth rate in more than six years and one of the largest annual gains in the index’s more than 30-year history.
Like many real estate companies, Compass faced challenges at the start of the pandemic due to back home orders and uncertainty about the economy. The company will cut 15% of its workforce in March 2020.
However, the company recovered dramatically in the second half of the year and “the total number of transactions rose to 144,784, an increase of 66% from 2019, despite the effect of the COVID-19 pandemic,” Compass said in the filing. .
Shares of the online real estate site Zillow have tripled in the past year, while Redfin’s shares have risen nearly as much.
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