Robert Reffkin, CEO of Compass, speaks on stage on November 6, 2019 in New York City.
Brad Barket | Getty Images
Compass, a real estate broker with more than 19,000 brokers across the country, went public on Monday and told potential investors that revenue increased 56% last year as housing prices soared.
Founded in 2012, the New York-based company has sought to bring advanced technology to real estate brokers by providing them with better data, marketing tools and customer relationship software than they can get from a traditional brick and mortar broker.
Compass is among many technology-driven real estate companies to benefit from a flood of venture capital that has allowed emerging companies to grow rapidly while burning money. Revenue rose to $ 3.7 billion last year from $ 2.4 billion in 2019, but the company spent 88% of its sales on commissions and “other transaction-related expenses”.
The year’s net loss decreased to $ 270.2 million from $ 388 million in 2019 and its cash and cash equivalents shrank 20% to $ 440.1 million.
Compass was last valued at around $ 6.4 billion in a 2019 financing round led by SoftBank’s Vision Fund, which also invested in office rental company WeWork, on the OpenDoor home launch website and on construction technology company Katerra. OpenDoor went public last year through a reverse merger and is now worth more than $ 17 billion, while WeWork is still trying to recover from a near collapse in 2019. SoftBank owns 35% of Compass Class A shares .
The residential real estate market has been a booming market for the past year, driven by Covid-19 and the blockages that forced people to work from home. With the perception that remote work is here to stay, the owners sought to move to more desirable locations, but the new offer was limited, causing prices to rise.
National home prices increased 10.4% in December, compared to the previous year, according to S&P CoreLogic Case-Shiller home price indices. This is the strongest annual growth rate in more than six years and one of the largest annual gains in more than 30 years of the index’s history.
Like many real estate businesses, Compass faced challenges at the start of the pandemic because of requests to stay home and the uncertainty surrounding the economy. The company cut its staff by 15% in March 2020.
However, business recovered dramatically in the second half of the year and “total transactions increased to 144,784, an increase of 66% compared to 2019, despite the effect of the COVID-19 pandemic,” said Compass in the process.
Shares in the online real estate website Zillow tripled last year, while Redfin’s shares rose almost as much.
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