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Investment Opportunities

Compass IPO: Real Estate Startup Confidentially Files

Although a Compass IPO is coming to market, investors aren’t sure about Compass stock. The company has planned to go public for the last couple years despite criticism from rivals.

So, is Compass a good investment opportunity? Here’s what we know…

Compass IPO: The Business

The Compass IPO is confidential.

CEO Robert Reffkin and Executive Chairman Ori Allon co-founded Compass Real Estate in 2012. Reffkin’s mother is a long-time agent and inspired him to start the company. Compass claims it’s building the first modern real estate platform. By using the best tools, Compass believes it can create the ultimate search and sell experience for clients.

Compass has more than 17,000 agents across the U.S. It’s the country’s largest independent real estate brokerage with over 18,000 agents. And in 2019, it was the third largest residential brokerage overall in the U.S. behind Realogy and Berkshire Hathaway Homeservices. Compass had $91.2 billion in sales whereas its competitors had $176.3 billion and $135.9 billion, respectively.

The Compass IPO is confidential. That means although the paperwork was filed, investors can’t see it. But the offering is part of a long-term plan as the company has been preparing. So, for those interested in Compass stock, let’s take a look as some of the changes Compass made.

Compass Prepares for Stock Offering

In preparation for Compass stock to hit the market, the company made some new additions to its board. The first is Eileen Murray, former co-CEO of Bridgewater Associates. Murray also held executive positions at Credit Suisse First Boston, Investment Risk Management and Morgan Stanley.

The second addition is former Oracle Corp. president Charles Phillips. A veteran of the U.S. Marines, Phillips was VP of Software for BNY Mellon and Senior VP for SoundView Technology and Kidder Peabody. Phillips also held a managing position at Morgan Stanley before continuing his career at Oracle. Institutional Investor ranked him the top Enterprise Software Industry Analyst from 1994 to 2003.

LinkedIn Senior VP and CFO Steve Sordello is the third addition to the board ahead of the Compass IPO. Before his days at LinkedIn, Sordello was Executive VP for IAC Search & Media and Senior VP/CFO for Tivo Inc.

And finally, the last board addition is Pamela Thomas-Graham. An alumni of Harvard Business School, Thomas-Graham was the first African American woman to be partner at McKinsey & Company. From there she became president of CNBC.com and Chief Executive of the cable network where her success became a Harvard Business School case study. Thomas-Graham was on Credit Suisse’s Executive Board and Lead Independent Director for Clorox’s board. She published three books.

In addition to strengthening its board, Compass also hired former Amazon executive Greg Hart as its new Chief Product Officer. Hart led Amazon’s video streaming service, worked as technical advisor to Jeff Bazos and was VP of Amazon Echo and Speech.

All of these additions are helping lead to one thing: Compass stock. Like any company looking to go public, Compass needs to present a strong image with a hopeful future. But there could be some bumps in the road for the Compass IPO…

The Legal Situation

Compass has some challenges to overcome such as competition’s criticism and ownership rights. Here’s a description of what the company faced in the courtroom.

Realogy vs. Compass

Every market has competition. But some are fiercer than others. Compass’ rival Realogy Holdings, the largest real estate brokerage in the U.S., filed a lawsuit against Compass in July. The lawsuit accused Compass of unfair business practices and illegal schemes. It states:

To reach its desired ends, Compass steals from, tortiously interferes with, and disparages its competitors. Compass’ very business model is founded on misappropriating, by whatever means necessary, the assets, confidential business information, trade secrets, contracts, talent, and strategies of its competitors… Its conduct has damaged – and unless Compass is stopped, will continue to damage – the real estate industry by suffocating competition through improper means, to the detriment of its competitors, agents, and consumers as well.

The competitor has a number of accusations against Compass.

  1. Compass poaches employees and agents by promising sign-on bonuses and larger pay.
  2. Compass encourages these agents to reveal confidential information about their previous employers.
  3. Compass hacks competitor computer systems to gain inside information, which is used to poach staff.
  4. CEO Reffkin solicited Realogy to enter an agreement that would have the rivals agree to limit compensation and compete on brand, not price. Realogy says it declined the agreement.

But Compass responded, claiming its competitors are using legal means to suppress Compass out of fear of competition.

At Compass we focus on providing the best possible experience for our employees, agents and their clients. Instead of building a better future for the real estate industry, our competitors are using the court system to stifle competition, but these efforts have been unsuccessful. Compass will continue on its mission to meaningfully improve the real estate industry and help everyone find their place in the world.

Avi Dorfman vs. Compass

In addition to competition, the company also faces ownership issues. Dorfman claims that he co-founded Compass and is entitled to his share. The case got a jury trial.

At first, Compass claimed that any compensation Dorfman may be entitled to should match the value of Compass stock in 2012, when he allegedly helped found the company. But over the summer, Judge Andrea Masley said valuation questions weren’t a part of the trial and a jury will decide if Dorman gets present shares. But Compass hopes to pay anything owed to Dorfman in cash, not Compass stock.

However, Dorfman and his team aren’t happy with that idea. One reason could be the Compass IPO. If Dorfman accepts the cash, he wouldn’t benefit from any success a Compass offering has. Additionally, if he is awarded shares, Dorfman can request financial information and could have a powerful vote. In 2019, Dorman’s team stated he could be entitled to 2.5 million shares. Compass’ most recent funding round raised $370 million at a price of $154.27 a share.

So, what do we know about the Compass IPO?

Compass IPO Details

Compass filed confidentially with the SEC. Many companies started doing this to gauge investor demand without revealing everything. As a result, the Compass IPO date, price range and offer shares are unknown.

If you’re looking for the latest investment opportunities, we suggest signing up for our Wealthy Retirement e-letter. All you have to do is enter your email address below and hit enter to receive free tips and research straight from our investing experts.

And if IPO or SPAC investing interests you, check out our IPO Calendar to stay up-to-date on the latest opportunities.

If Compass can overcome the bad press, Compass stock has a chance to be successful. But we won’t fully know what this opportunity looks like until the Compass S-1 filing is public. Make sure to check back in for updates on the Compass IPO so you don’t miss out.


About

Amber Deter has researched and written about initial public offerings (IPOs) over the last few years. After starting her college career studying accounting and business, Amber decided to focus on her love of writing. Now she’s able to bring that experience to Investment U readers by providing in-depth research on IPO and investing opportunities.

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