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Compass’ IPO takes a cut

April 1, 2021, 3:24 PM UTC

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As high-flying tech stocks are roiled by projections of a robust economic reopening, it’s becoming a tough time to go public.

That may be one way to explain the IPO of Compass, a real-estate tech business.

A week ago, the company sought to raise as much as $936 million in a sale of about 36 million shares priced between $23 to $26 apiece. 

But on Wednesday, the roughly nine-year-old business revealed that it had only raised $450 million in a sale of 25 million shares priced at $18 apiece.The pricing still values the SoftBank-backed company at about $7 billion, a slight uptick to its last-known private market valuation of about $6.4 billion.

In its IPO prospectus, the company emphasized its software that allows real-estate agents to list homes, schedule tours, manage relationships, and analyze the market. In turn, Compass takes a cut of the commission from selling a home.

“We are replacing today’s complex, paper-driven home-buying and selling process with an all-digital, end-to-end platform that empowers real estate agents to deliver an exceptional experience to every buyer and seller,” Compass founder and CEO Robert Reffkin touted in the letter published in the company’s IPO filing.

The IPO comes amid a pandemic-fueled housing boom in the country. Compass’s revenue rose 56% to $3.7 billion in 2020. But it still represented slower growth than in 2019, when the topline figure rose 170% to $2.4 billion. In a more positive sign, losses also narrowed last year by 30% to $270.2 million.

But for Compass, investors’ doubts may include not only concerns around the macroeconomic environment—but also about the company’s own business. The question Compass has faced in recent years and will continue to face: Is the company truly changing real estate and can it be categorized as a tech company?

Lucinda Shen
Twitter: @shenlucinda

P.S. Ed-tech companies have also taken off in the past year. Now, one has become a guinea pig for public-market investors: Coursera went public on Wednesday, raising nearly $520 million in an IPO of 15.7 million shares priced at $33 apiece, the high end of its range. On its first day of trading, the stock also jumped 36% in a sign that investors believe in its prospects even in a post-pandemic future. But what will that future look like? I spoke with Coursera CEO Jeff Maggioncalda on what he envisions for the coming years in education. Read the full interview here.

Correction: This article previously stated 2020 revenue rose 54% to $3.7 billion in 2020. The correct figure is 56%.


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