Robert Reffkin, CEO of Compass, speaks on stage on November 6, 2019 in New York City.
Brad Barket | Getty Images
Compass, a real estate brokerage firm with more than 19,000 agents across the country, filed for listing on Monday and told potential investors that incomes rose 56 percent last year as house prices rose.
Founded in 2012, the New York-based company has sought to bring advanced technology to real estate agents by providing them with better data, marketing tools and customer relationship software than they can get from a typical brick-and-mortar brokerage.
Compass is among the many technology-based real estate companies that benefit from a venture capital cash flow that has allowed emerging businesses to grow rapidly while burning cash. Revenue rose to $ 3.7 billion last year from $ 2.4 billion in 2019, but the company spent 88 percent of its sales on commissions and “other transaction-related expenses.”
Net losses for the year fell to $ 270.2 million from $ 388 million in 2019, and cash and cash equivalents fell 20% to $ 440.1 million.
Compass was last valued at about $ 6.4 billion in a 2019 round of financing led by Vision Fund, SoftBank, which also invested in the office rental company WeWork, the OpenDoor website and construction technology company Katerra OpenDoor went public late last year through a reverse merger and is now worth more than $ 17 billion, while WeWork is still trying to recover from a crash near 2019. SoftBank owns 35% of the shares Class A compass.
Residential buildings have been a booming market in the last year, driven by Covid-19 and blockages that have forced people to work from home. Realizing that remote work is here to stay, homeowners sought to move to more desirable locations, but the new supply was limited, leading to rising prices.
Home prices rose nationwide by 10.4% in December compared to a year earlier, according to S&P CoreLogic Case-Shiller Home Price indices. This is the strongest annual growth rate in the last six years and one of the highest annual gains in the index’s over 30-year history.
Like many real estate companies, Compass faced challenges at the beginning of the pandemic, due to home orders and uncertainty around the economy. The company reduced its staff by 15% in March 2020.
However, business returned dramatically in the second half of the year and “total transactions increased to 144,784, an increase of 66% from 2019, despite the effect of the COVID-19 pandemic,” Compass said in the file.
Shares of online real estate site Zillow have tripled in the past year, while shares of Redfin have risen nearly as much.
CLOCK: Jim Cramer says it’s the perfect time to own Zillow