What’s Happening: Positioning itself as a tech company rather than a traditional brokerage, Compass is aiming to go public at a $10 billion valuation. The New York-based real estate firm announced it will offer 36 million shares priced between $23 and $26 a share. With that price tag, Compass will earn $936 million in its public launch. In its initial filing, Compass outlined $3.7 billion in 2020 revenue, up 56 percent year over year.
The Download: Compass’s heavy spending and lack of profitability has earned it a bad reputation with critics, who have questioned its valuation. In its IPO filing, it listed $1.1 billion in cumulative losses, notably including $270 million last year. By trying to get a $10 billion valuation, Compass is positioning itself more like listings and iBuying giant Zillow than brokerage conglomerate Realogy.
In Their Own Words: “The brokerage model was originally designed to be a one-stop shop for everything an agent needed,” said Compass CEO Robert Reffkin in the company’s S-1, a prospectus that details its financial performance and business strategy filed ahead of an IPO. “We are replacing today’s complex, paper-driven home-buying and selling process with an all-digital, end-to-end platform that empowers real estate agents. Despite various ‘agentless’ models such as iBuying and for-sale-by-owner, nearly 90 percent of sellers and buyers in the U.S. work with real estate agents. We believe that real estate agents are an underserved group of business owners.”
Surface Says: Thanks to booming markets and a centralized desire to digitize the antiquated home buying process, real estate stocks have recently been soaring.