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- Compass shares began trading on the New York Stock Exchange on Thursday under the ticker symbol COMP.
- The IPO could bring in billions of dollars to its executives and biggest funders.
- CEO Robert Reffkin could become America’s eighth black billionaire if stocks hit price targets.
- See more stories on the Insider business page.
Residential brokerage firm Compass began trading on the New York Stock Exchange on Thursday.
The company valued its initial public offering at $ 18 a share yesterday, more than 20% below the low end of the company’s expected range. That put Compass’s valuation at $ 7 billion, a revised downward total of $ 10 billion, according to a modified S-1 filing on Wednesday. You can follow the stock, which trades under the symbol COMP, here.
Even though the IPO raised around $ 450 million for Compass – less than half of what it had previously researched – it will nonetheless earn co-founder and CEO Robert Reffkin one of the greatest fortunes anyone has ever accumulated. leader of the real estate industry for the past decade.
According to an Insider analysis, the IPO could put Reffkin on the path to making more than $ 1 billion. This total comes from the addition of stock awards granted to him by the company, other shares promised to him if the shares meet ambitious price targets, and awards that will vest over time.
If Reffkin is able to collect all the shares, he will only be the eighth black billionaire in the United States, according to Forbes’ Billionaire List – and the youngest, at 41.
Reffkin, a former Goldman Sachs executive who founded Compass in 2012 with tech entrepreneur Ori Allon, owns $ 429.4 million in Compass stock at a loss or in trusts he controls. In addition, it will be awarded $ 166.3 million in increments over the next four years, and there is another $ 440 million in shares that will be awarded to it if the shares meet successive price targets of up to $ 77.15. per share, or more than four. times the IPO price of Compass.
Reffkin’s involvement propels him from an outsider in the residential brokerage industry to one of its most successful executives. By comparison, Ryan Schneider, CEO of Compass competitor Realogy, earned around $ 9 million in 2018 and 2019, and $ 5.2 million in 2017.
“There are probably only five companies a year that go public where one or more individuals become billionaires,” Jay Ritter, professor of finance at the University of Florida, told Insider, speaking of the relative rarity of minted billionaires. during initial public offerings.
The IPO opens a new chapter in Reffkin’s rise. After earning an undergraduate degree and an MBA from Columbia University, Reffkin held prestigious positions with business consulting firm McKinsey, investment firm Lazard, and the presidential administration of George W. .Bush, where he was a member of the White House at the Treasury Department. At Goldman Sachs, Reffkin became chief of staff to Gary Cohn, who was then president and chief operating officer of the company.
Reffkin and his mother, Ruth, who is an agent for Compass, walked outside the New York Stock Exchange after ringing the opening bell Thursday morning.
Compass
But Compass’s IPO appears to have been dampened by concerns over its plans for profitability. Since its inception, Compass has lost around $ 1 billion, including $ 270 million in 2020. It imagines expanding into ancillary businesses, such as mortgage brokerage, which are filled with competition. Other products that supplement its income, such as a loan business that allows sellers to renovate their homes for higher selling prices, are also offered by competing companies.
It also rapidly increased its revenues by 20-fold – from $ 187 million in 2016 to $ 3.7 billion in 2020 – and its market share of US home sales by volume from 1 to 4% between 2018 and 2020, according to the company’s S-1. . These figures suggest that the company will be a growing force in the market with approximately $ 100 billion in residential real estate transaction commissions paid annually in the United States.
“Most real estate brokers are growing in single-digit percentages,” said David Walker, CEO and co-founder of Triplemint, a New York-based brokerage firm that, like Compass, seeks to use technology to increase the productivity of its brokers. . “Compass is growing 10 times faster.”
Co-founder Ori Allon joined Reffkin in ringing the opening bell Thursday morning.
NYSE
Japanese tech investor SoftBank, which suffered a high-profile financial blow from its WeWork investment, is expected to cash in on Compass. The company, which has invested more than $ 400 million in Compass, could earn around $ 2.3 billion on the IPO, according to Compass’s S-1. Allon, co-founder of Compass, owns shares worth nearly $ 344 million.
Another of Compass’s major shareholders is hedge fund Discovery Capital Management, which owns more than 33 million shares, which could be worth nearly $ 600 million.
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