Robert Reffkin (Getty, Securities and Exchange Commission)
On the verge of going public, Compass announced that it earned $ 3.7 billion in revenue last year but lost $ 270 million, according to an investor prospectus it filed Monday.
The IPO filing, known as a Form S-1, provides the clearest overview of the company’s finances, arguably the fastest growing U.S. residential brokerage in a generation. Compass’ revenue grew by 56 percent in 2020 from $ 2.4 billion in 2019. This reduced its losses of $ 388 million in 2019 and lost a total of $ 1.1 billion on December 31, 2020.
Founded in 2012, Compass has 19,000 agents and in 2020 became the third largest broker in the U.S. according to transaction volume, according to Real Trends data, with more than $ 91 billion in 2019 sales. The company included $ 1.5 billion in investors, including SoftBank Group, and was last valued at $ 6.4 billion after a July 2019 financing round. Its rise was fueled by a combination of organic growth, agent recruitment and a spate of notable acquisitions. The S-1 currently shows $ 440.1 million in cash.
The company submitted a draft registration statement to the US Securities and Exchange Commission in early January as The right transaction first report. However, the document it submitted today will provide prospective investors in the public market with information on the financial, competitive landscape and leadership.
The document reveals, for example, that co-founder Ori Allon left the board of directors of Compass in February. Allon was previously executive chairman; his new title on the firm’s website is ‘Chief Strategist’. Allon owns just over 1.9 million Class A ordinary shares, or about 5.2 percent of the total issued Class A shares.
Robert Reffkin, co-founder and CEO, owns just over 860,000 Class A shares, or about 2.4 percent of the total issued Class A shares. Reffkin also owns more than 1.5 million Class C ordinary shares, giving him 20 votes per share.
Other major shareholders include SoftBank’s Vision Fund, which owns 34.8 percent of Class A ordinary shares, through subsidiary SVF Excalibur (Cayman) Limited. Hedge funder Robert Citrone’s Discovery Capital Management owns 9.2 percent of the A shares.
According to the S-1, Compass said it had sold $ 151.7 billion in real estate by 2020. Its transactions are 66% higher than on an annual basis. The firm claims that it now owns about 4 percent of the U.S. housing market.
The prospectus also quoted the most important legal battle facing Compass.
In 2014, the firm was sued by Avi Dorfman, who claims to have been a co-founder of Compass but was later cut out of action. Compass called his suit ‘opportunistic’.
Compass also faces a wide-ranging lawsuit from key rival Realogy, the parent company of the Corcoran Group and Coldwell Banker. The public real estate giant sued in 2019, claiming that Compass was engaging in illegal business practices and robbery. Compass defended his actions and demanded arbitration in the case, which was denied. In January, Compass sued Realogy, accusing the company of waging a ‘war of disinformation’.
This is an evolving story. Please come and check for updates.
Erin Hudson reported.