- Compass shares started trading Thursday on the New York Stock Exchange under the ticker COMP.
- The IPO could earn its executives and largest backers billions of dollars.
- CEO Robert Reffkin could become the US’s eighth Black billionaire if shares hit pricing targets.
- See more stories on Insider’s business page.
The residential-brokerage firm Compass started trading on the New York Stock Exchange Thursday.
The company priced its initial public offering at $18 a share yesterday, more than 20% below the low end of the firm’s anticipated range. That put Compass’ valuation at $7 billion, a total revised down from $10 billion, according to an amended S-1 filing from Wednesday. You can track the stock, which is trading under the ticker COMP, here.
Even though the IPO raised about $450 million for Compass — less than half of what it had previously sought — it will nonetheless earn its cofounder and CEO Robert Reffkin one of the largest fortunes amassed by any executive in the real estate industry over the past decade.
According to an analysis by Insider, the IPO could put Robert Reffkin, the 41-year old cofounder of Compass, on the path to earning more than $1 billion. That total comes from adding together stock awards he has been granted by the company, other stock promised to him if the shares meet ambitious prearranged pricing targets, and awards that will vest over time.
If Reffkin is able to collect all of the shares, it would make him only the eighth Black billionaire in America — and the youngest.
Reffkin, a charismatic former Goldman Sachs executive who founded Compass in 2012 with the technology entrepreneur Ori Allon, owns $429.4 million worth of Compass shares outright or in trusts he controls. In addition, $166.3 million will be granted to him in increments over the next four years, and there’s another $440 million in stock that will be awarded if the shares hit successive pricing targets that reach as high as $77.15 a share, more than four times Compass’s IPO price.
Reffkin’s stake propels him from an outsider in the residential brokerage business to one of its most successful executives. Compass competitor Realogy’s CEO Ryan Schneider, in comparison, earned roughly $9 million both in 2019 and 2018, and $5.2 million in 2017.
“There are probably only five companies a year that go public where one or more individuals becomes a billionaire,” Jay Ritter, a finance professor at the University of Florida, told Insider, speaking of the relative scarcity of billionaires that are minted in IPOs.
The IPO opens up a new chapter in Reffkin’s ascent from a modest upbringing by a single mother in Berkeley, California. After earning an undergraduate degree and MBA from Columbia, Reffkin took prestigious positions at the business consulting firm McKinsey, the investment firm Lazard, and George W. Bush’s presidential administration, where he was a White House fellow in the Treasury Department. At Goldman Sachs, Reffkin rose to become chief of staff to Gary Cohn, who was the firm’s president and chief operating officer at the time.
Compass’s IPO, however, appears to have been diminished by concerns over its plans to achieve profitability. Since its founding, Compass has lost roughly $1 billion dollars, including $270 million in 2020. It imagines growing into ancillary businesses such as mortgage brokerage that are packed with competition. Other products that pad its revenue, such as a lending business that allows sellers to renovate their homes to reap higher sale prices, are also offered by rival companies.
It has also rapidly grown its revenue by 20 times — from $187 million in 2016 to $3.7 billion in 2020 — and its market share of US home sales by dollar volume from 1% to 4% between 2018 to 2020. Those figures suggest the firm will be a growing force in the roughly $100 billion market for residential real-estate transaction commissions paid annually in the US.
“Most real estate brokerages are growing in the single-digit percentages,” said David Walker, the CEO and cofounder of Triplemint, a New York City based brokerage firm that, like Compass, seeks to use technology to augment the productivity of its brokers. “Compass is growing 10 times faster.”
The Japan based technology investor, SoftBank, which took a much-publicized financial blow from its investment in WeWork, stands to reap a gain from Compass. The firm, which invested over $400 million in Compass, could earn around $2.3 billion in the IPO, according to Compass’s S-1. Allon, Compass’s cofounder, holds shares worth nearly $344 million.
Another one of Compass’s largest shareholders is the hedge fund Discovery Capital Management, which owns over 33 million shares that could be worth nearly $600 million.
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