Real Estate Company Compass Seeks $10 Billion Valuation in US IPO

By Adriana Anastasiades Tuesday, March 23, 2021

Real estate agent shaking hands with a homebuyer.

Real estate brokerage company Compass is targeting a business valuation of up to $10 billion in its upcoming initial public offering (IPO) in the United States.

Significant Rise in Online Home Transactions

Real estate business Compass is looking to secure around $936 million in the IPO through the sale of 36 million Class A shares priced in a range between $23 and $26 per unit, according to the company filing. Lead underwriters for the company’s IPO include Goldman Sachs, Morgan Stanley, and Barclays.

The real estate company, which is backed by famous tech investing fund SoftBank, said it has recorded a significant increase in online home transactions during the pandemic. Compass was founded in 2012 by former Twitter engineer Ori Allon and former Goldman Sachs director Robert Reffkin.

The company serves 46 metropolitan statistical areas in the US, collaborating with more than 19,000 agents. Most of Compass’s revenue comes from commissions generated through transactions on the platform.

So far, the company has secured $1.5 billion from big investors such as SoftBank, Goldman Sachs, and Canada Pension Plan Investment Board. After its $370 million financing round in 2019, Compass reached a business valuation of $6.4 billion.

On March 1, Compass released its S-1 in anticipation of an IPO on the New York Stock Exchange (NYSE). With its product, Compass aims to replace the "paper-driven, antiquated workflow" of purchasing a house with an all-digital platform that "empowers real estate agents to deliver an exceptional experience."

A large part of the company’s popularity comes from its successful ways of attracting and retaining new agents. The real estate business said it is collaborating with agents rather than attempting to replace them.

After raising $8 million in its seed round, the company quickly attracted large business investors, like SoftBank and Goldman Sachs, and initiated an acquisition campaign in the US.

However, following the economic collapse amid the coronavirus pandemic, Compass was forced to lay off 15% of its staff. But the demand in the housing market started to surge as families started to look for bigger houses due to the work-from-home conditions.

By summer 2020, the company was recording new highs in monthly business revenues, with total transactions soaring 66% compared to 2019. Compass claims it has recorded a 19% surge in the number of transactions its agents close in their second year.

Moreover, Compass posted an 88% increase in agent teams who use the platform every week. It also claims that its agents sell homes 21% faster compared to agents at companies with comparable home sales.

Compass charges a fee of between 2.5% and 3% of the house’s sale price. The company also aims to increase the share of business revenue it makes through adjacent services, including arranging the title and escrow for a home sale and referring new buyers to relevant services.

Summary

Real estate brokerage business Compass is looking to hit a valuation of up to $10 billion in its US IPO.l.

About the Author


Headshot for author Adriana Anastasiades

Adriana is a Journalist with a passion for reporting on business leadership, with a diverse interest in multiple industries.

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