Tech-based brokerage Compass files for IPO

Spurred on by a booming housing market, the technology-powered real estate brokerage Compass said Monday that it’s planning to go public via an initial public offering later this year.

Compass was founded in 2012 and has attracted thousands of agents due to its high-tech offerings that arm them with better data and analytics, marketing and customer relationship tools than traditional brokerages can provide.

The company also revealed details of its finances for the first time, telling prospective investors through a filing that its revenue grew by 56% last year to $3.7 billion The company still runs at a loss, though that narrowed to just $270.2 million last year, from $388 million in 2019. Its cash and equivalents also shrank by 20% to $440.1 million.

Compass has benefited from a huge amount of venture capital that has allowed it to grow its business while running at a loss. The company was most recently valued at $6.4 billion following a $450 million funding round in 2019 that was led by SoftBank Group’s Vision Fund, which has notably also invested in the iBuying company Opendoor.

Last year Opendoor went public itself through a merger with a special-purpose acquisition company. It’s now worth more than $17 billion.

Compass’s decision to go public is no doubt inspired by the booming residential real estate market in the U.S. that has seen sales increase amid the COVID-19 pandemic that has forced people to work from home. As people come to realize that remote work is likely to become a permanent thing, they’re looking to move to more desirable locations. Housing supply is limited however, causing prices to grow sky high.

The S&P CoreLogic Case-Shiller Home Price Indices reveal that home prices nationally jumped by 10.4% in December alone, the strongest annual growth rate in over six years.

Compass, like many real estate businesses, initially faced challenges at the start of the pandemic due to stay-at-home orders and the general uncertainty it caused. It cut its workforce by 15% in March 2020.

However, the company has since rebounded strongly, with its total transactions increasing by 66% to 144,784 last year.

Other real estate technology firms have also grown strongly in the last year. Zillow, for example, has seen its stock price triple in the last 12 months, while Redfin, a competitor to Compass, has seen similar increases.