Compass has filed confidentially for an IPO. The residential real estate brokerage that fashions itself as a tech company is taking advantage of the IPO frenzy and frothy markets. Many in the real estate community question why Compass should receive a tech valuation when it has used traditional means to grow.
- Private funding expedited growth : Compass has raised $1.5 billion in the private market from investors, including SoftBank’s Vision Fund, Canada Pension Plan Investment Board (CPPIB), and Dragoneer Investment Group.
- Tech is questionable: With unlimited resources, Compass has poached many brokers from competitors to accelerate growth. Simply incentivizing brokers to join by offering nice signing bonuses and higher commission splits is not disruptive. Consolidation is a nice strategy, but not a transformational one.
- Worth Noting: The residential brokerage said it submitted a prospectus with the U.S. Securities and Exchange on Monday. It did not disclose how many shares it will offer.
- Be Smart: The pandemic has accelerated technological shifts that were previously bubbling underneath the surface. Cloud-based residential brokerage eXp Realty (AKA eXp World Holdings) and commercial virtual brokerage KayoCloud have been the beneficiaries. The two companies provide their agents with end-to-end software that automates all back-office work.
- By the numbers: eXp World Holdings has seen its shares increase by over 370% this year, and now boasts a market cap of $3.66 billion. On the commercial side, KayoCloud has seen a surge in usage by 800%. To date, the venture-backed startup has facilitated over $427 million in commercial investment sales volume. [Bloomberg+Crain’s+FinLedger]