Compass Inc. Ups the Ante With $10B IPO Valuation

New York-based Compass Inc. wants to up the ante when it goes public.

The SoftBank-backed real estate startup is reportedly seeking a $10 billion valuation in its U.S. IPO when it finally hits The New York Stock Exchange. Compass announced Tuesday that it plans to offer 36 million shares of its common stock at a public offering price of $23 to $26, according to its recently updated SEC filing. 

The company stands to raise $936 million when it goes public at that price. According to the filing, proceeds from the sale of shares will go toward “working capital and general corporate purposes.” A portion of the sale of shares may also go toward acquisitions or investments, according to the filing. 

Compass does not currently have any binding agreements or commitments for acquisitions “outside the ordinary course of business,” according to the filing.

Goldman Sachs, Morgan Stanley, Deutsche Bank, UBS Investment Bank and Barclays are underwriters and will have the option to purchase an additional 5.4 million shares, according to the filing. 

Compass has touted offerings of advanced technology, marketing tools, CRM software and more to recruit thousands of agents since launching in 2012.

“At Compass, we are agent-obsessed,” wrote Compass Inc. CEO Robert Reffkin in a letter submitted with the IPO. “We’ve built a business completely aligned with our agents: When agents succeed, Compass succeeds. Our commitment to the agent is not contingent and is not temporary; it is foundational to our vision, our strategy and our success—and it always will be.”

One of the company’s recent tactics has been its Agent Equity Program, which allows agents to invest a share of their commissions in exchange for stock options.

According to the filing, Compass is offering an updated version of the program that will go into effect “immediately before the effectiveness of the registration statement of which this prospectus forms a part.”

“The 2021 Plan authorizes the award of both incentive stock options, which are intended to qualify for tax treatment under Section 422 of the Code, and nonqualified stock options, as well for the award of restricted stock awards, or RSAs, stock appreciation rights, or SARs, restricted stock units, or RSUs, and performance and stock bonus awards,” read the filing

The New York-based brokerage’s revenue rose to $3.72 billion in 2020 from $2.39 billion the year prior—roughly a 56% YoY increase. 

Compass struggled in the early days of the pandemic, which resulted in the firm laying off 15% of its employees. The company reported net losses of $388.0 million and $270.2 million in 2019 and 2020, respectively.

According to a Bloomberg article, SoftBank-related funds own about 35% of the Class A shares of Compass, while Reffkin, who has 2.4% of the Class A shares, currently owns all of the Class C shares.

Reffkin’s holdings account for 46% of the voting power of Compass’s outstanding capital stock. According to the filing, that could jump up to 69% if he “vests and settles in certain equity awards, including specific performance-based equity awards, outstanding at the time of the completion of this offering.”

“As a result, Mr. Reffkin will be able to determine or significantly influence any action requiring the approval of our stockholders, including the election of our board of directors, the adoption of amendments to our certificate of incorporation and bylaws, and the approval of any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transactions,” the filing said. 

This is a developing story. Stay tuned to RISMedia for more updates.

Jordan Grice is RISMedia’s associate content editor. Email him your real estate news ideas at jgrice@rismedia.com.