U.S. real estate brokerage is backed by SoftBank of Japan
The compass, backed by SoftBank, garnered only half of what it expected from the initial public offering, a sign that investors have become cautious about the intentions of the brokerage equipped with technology to suspend real estate sales.
Compas had their shares priced at $ 18 each on Wednesday evening, according to the company, which raised $ 450 million.
Previously, the company had reduced the share it intended to sell by almost a third and cut its price to more than a quarter.
At the price of the final offer, Compass will have a market capitalization of $ 7 billion, which represents an increase in the final private valuation of $ 6.5 billion two years ago.
The compass is trying to differentiate itself from other real estate brokers through a digital marketing and analysis platform for its agents, which has helped catapult the company’s valuation into a range reserved for large tech start-ups. The company had more than 19,000 agents on its platform at the end of last year and accounts for 4 percent of the U.S. home buying market.
Unlike other real estate technology companies, for example Open the door, which charges a service fee for buying and subverting homes, Compass has a more traditional business model that takes a commission reduction when an agent sells the home.
Compass revenue increased 56 percent last year to $ 3.7 billion, and net losses were reduced to $ 270 million from $ 388 million in 2019.
The company’s public debut was the rise of Americans in the US housing market trade in city apartments for suburban housing as a result of the pandemic. Average home prices rose at their highest rate since January 2006, according to the S&P CoreLogic Case-Shiller index, a measure of U.S. home prices.
With $ 1.5 billion in venture capital funds raised before the IPO, Compass has been able to quickly build its agent base through, among other things, the acquisition of independent intermediation.
Other brokers have accused the company of using its money poach agents with strange compensation packages. Some who joined Compass complained that these advanced compensation packages created a misleading appearance about who would win.
Compass said in a pamphlet that the retention rate among “major agents” (group leaders or independent agents together accounted for half of the total contractor base) has exceeded 90 percent in the last three years. Analysts have warned that it could attract competitors with better deals.
“Real estate agents, they’re independent contractors, they’re entrepreneurs, ”said Mike DelPrete, an independent real estate technology consultant.“ At a time when compass earns less for agents, there’s a big retention issue. ”
Robert Reffkin, CEO of Compass, will retain almost half of the company’s voting power after the offer, thanks to ownership of the Class C shares, each with 20 votes. As Reffkin’s compensation package gets worn over time, he will gain majority control of the company.
SoftBank Owned by Vision Fund 36.7% of the company’s Class A shares, offering a $ 2.3 million stake in the offer price.
Compass was led by Goldman Sachs, Morgan Stanley and Barclays.