Robert Reffkin, CEO of Compass, speaks on stage on November 6, 2019 in New York City.
Brad Barket | Getty Images
Compass, a brokerage firm with more than 19,000 agents across the country, filed Monday to introduce the public, telling prospective investors that incomes rose 56% last year when house prices rose.
The New York-based company, founded in 2012, has sought to provide advanced technology to brokers, giving them better data, marketing tools and customer relationship software than they can get from a typical brokerage industry.
Compass is one of the many technology-driven real estate businesses that take advantage of a flood of venture capital money that enables emerging businesses to grow rapidly while burning cash. Revenue rose to $ 3.7 billion from $ 2.4 billion in 2019 last year, but the company spent 88% of its sales on commissions and ‘other transaction-related expenses’.
The net loss for the year decreased to $ 270.2 million from $ 388 million in 2019 and its cash and equivalents shrank by 20% to $ 440.1 million.
Compass was last valued at approximately $ 6.4 billion in a 2019 financing round led by SoftBank’s Vision Fund, which also invested in the office leasing company WeWork, the home company OpenDoor and the construction technology company Katerra. OpenDoor was announced late last year through a reverse merger and is now worth more than $ 17 billion, while WeWork is still trying to bounce back from an almost collapse in 2019. SoftBank owns 35% of Compass’ A shares.
Residential real estate has been a booming market in recent years, driven by Covid-19 and the barrier that has forced people to work from home. Realizing that distance work is here to stay, homeowners have tried to relocate to more popular places, but the new supply is limited, causing prices to rise.
Home prices rose 10.4% nationwide in December, compared to a year earlier, according to the S&P CoreLogic Case-Shiller house price indices. It is the strongest annual growth rate in more than six years and one of the largest annual gains in the index of more than thirty years.
Like many real estate businesses, Compass faced challenges at the start of the pandemic due to stay-at-home orders and economic uncertainty. The company cut 15% of its staff in March 2020.
In the second half of the year, however, business recovered dramatically and ‘total transactions increased to 144,784, an increase of 66% over 2019, despite the impact of the COVID-19 pandemic,’ Compass said in the submission.
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