For Compass agents invested in the firm’s success, nothing can rain on their parade.
Last week, Compass’s initial public offering raised $450 million. Though the company had at one time hoped to raise more than twice as much, Compass founders and top executives now have stock holdings worth millions on paper. But many of the rank and file also have skin in the game.
The effect, particularly for agents who’ve been at the firm five or six years, is one of shock and elation.
Broker Brian Lewis described getting a rush of excitement every time he looked at his Compass investments. Heather McDonough Domi, a Compass broker since 2019, said she knew of one veteran Compass agent who invested heavily for whom the IPO was “life changing.”
“This created an opportunity for real estate agents to actually build wealth and that is not something that is common for our industry,” said McDonough Domi.
Compass has been dangling equity for agents as part of their compensation since its founding in 2012, but later allowed agents to swap commission dollars for stock options or restricted stock.
In 2018 and 2019 agents invested more than $70 million through the program. (Compass declined to disclose 2020 figures.)
Compass’ 19,000 agents also had the opportunity to buy stock at the initial offering price of $18 per share through a directed share program prior to the IPO. Compass set aside 7 percent of the offering, or 1.75 million shares, for agents.
The opportunity to take part in an IPO was a huge factor in Lewis’s decision to join Compass. But Ronita Kalra, who signed on late last year, said she viewed the looming IPO as a “bonus” and not a given.
“It’s kind of a moment in history and it’s exciting to belong to the company that it’s happening to,” she said. Kalra bought shares through the pre-IPO directed share program.
Arthur-David Porosoff, a Florida-based commercial broker at Compass, was also eager to take advantage of the opportunity.
“I think you’d be crazy to have been offered a position and not have bought into it,” Porosoff said. “I wish I could’ve bought more.”
How the investments will fare for agents in the long run is an open question. The stock began trading at $21.25 Thursday. But on Monday it fell 7.3 percent to $18.59.
Agents who have departed Compass and elected not to exercise stock options upon exiting expressed no regrets. At least one viewed the initial offering price of $18 — slashed from the $23 to $26 target the company initially aimed for — as having little upside.
Unsurprisingly, current agents strongly disagree. Most said they had no intention of cashing out their shares in the coming months and believe the price has nowhere to go but up.
Vickey Barron, who said she took advantage of “100 percent” of all programs offered to agents, intends to hold her position. She bought Apple stock in 1995 and Amazon stock in the early 2000s, and still hasn’t sold them. She sees Compass in the same league.
“I truly think this is just the beginning because we’ve got the right vision and the right people behind that vision to get us where we’re going,” Barron said.
Boris Sharapan Fabrikant, who participated in the directed share program and also bought stock as trading began Thursday, said he plans to hold his investments for 10 years or more.
“I believe in this company and Robert so much,” he said, referring to Reffkin. “I kick myself for not buying Tesla early on … and I think this is going to be one of those companies.”
Vickey Barron and Boris Sharapan Fabrikant (Compass)
Some analysts are skeptical. After Compass’ S-1 was filed, analysts scrutinizing the company’s financials and business plan questioned Compass’ claim to be as much a technology company as a real estate brokerage.
The price of Compass stock after two days of trading means that the investing public does not view it as anything close to the next Apple, Amazon or Tesla. But it is not uncommon for stock-owning employees of a newly public company to think their firm is headed for the moon.
Addressing questions about Compass’ bona fides as a tech disruptor, Fabrikant said agents who have been “living, breathing, working” at Compass know better than the doubters. He compared its culture to that of shoe e-tailer Zappos, which Amazon bought in 2009 for $1.2 billion.
Terrence Harding, who joined Compass in 2016, is also planning to hold onto his stock. He said he expects big headlines that will send the price soaring in the coming months.
“I know how Compass moves,” said Harding. “They love to wow you, so I’m pretty sure there’s other things that they have set up for post-IPO.”
“They don’t plan their business moves week-by-week or day-by-day,” he added. “Something’s brewing.” Compass, which as a public company must now abide by strict rules for releasing information, declined to comment for this story.
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Here’s who made bank in Compass’ IPO
Compass’ IPO is not just about agents scoring windfalls and the company raising capital. It’s also the marketing opportunity of a lifetime — and Compass maximized the moment.
To promote its first day of trading, the brokerage custom-built a digital platform for agents to follow media coverage, rented huge billboards outside the New York Stock Exchange and in Times Square, and crafted tongue-in-cheek social-media posts for agents to share.
“They do everything,” said Harding, who used the platform to watch founders Robert Reffkin and Ori Allon ring the opening bell. “It was a production in real time.”
McDonough Domi was one of about 100 Compass agents and employees who gathered in Times Square on Thursday afternoon to celebrate the IPO.
“You’re trying to recognize people through masks that you haven’t seen in a year,” she recalled. “It was a lot of hugging, a lot of high-fiving, a lot of cheering.”
While Compass’ agents were rejoicing, some clients took notice too.
“Big day for Compass!!!” was among the messages Harding got from clients, in this case from an investment banker at Goldman Sachs, the firm that led the IPO’s underwriting (which cost Compass $22.5 million). McDonough Domi, who’s married to former New York Rangers hockey player Tie Domi, heard from major athletes including NFL quarterback Tom Brady.
“It’s a form of advertising,” said Fabrikant, who also had clients sending kudos. “It’s allowing our network to see Compass again and again.”
Despite the hoopla, Fabrikant said, Compass’ messaging to agents has not changed. He pointed to an email CEO Reffkin sent Wednesday, hours before the company began trading.
“Robert said in his email this isn’t just that we made it,” said Fabrikant. “This is going to give us the funds to keep growing into what we really want to do. It’s impressive for me because these are the moments where people just start thinking about the next chapter in their lives.”