Compass just went public, putting CEO Robert Reffkin on a path to become America's youngest Black billionaire
- Compass shares started trading Thursday on the New York Stock Exchange under the ticker COMP.
- Shares rose 18% on the first day of trading, earning its executives and largest backers billions.
- CEO Robert Reffkin could become the US’s eighth Black billionaire if shares hit pricing targets.
- See more stories on Insider’s business page.
Shares of the residential-brokerage firm Compass rose 18% during the company’s first day of trading Thursday.
The debut comes after the company priced its initital public offering (IPO) at $18 a share late last night, at the lower end of its range. Thursday trading lifted the stock to a closing price of $20.15 and the market capitalization to $7.9 billion.
(You can track the stock, which is trading under the ticker COMP, here.)
Compass disclosed in a filing that it had raised $427.5 million in the stock sale, less than half it had previously projected in the IPO.
Despite that, Compass’ New York Stock Exchange debut has bestowed upon cofounder and CEO Robert Reffkin one of the largest fortunes amassed by any executive in the real-estate industry over the past decade.
Reffkin is now officially on the path to a net worth of more than $1 billion. That total comes from adding together stock awards he has been granted by the company, other stock promised to him if the shares meet ambitious pricing targets, and awards that will vest over time.
If Reffkin is able to collect all the shares, he will be only the eighth Black billionaire in the US, according to Forbes’ billionaires list — and the youngest, at 41.
Reffkin, a former Goldman Sachs executive who founded Compass in 2012 with technology entrepreneur Ori Allon, owns $480.7 million worth of Compass shares outright and another $186.5 million that will be granted to him in increments over the next four years. Those shares gained over $70 million in value in Thursday’s trading over the opening share price. Reffkin will be granted another $440 million in stock if the shares hit successive pricing targets, starting at $23.14 a share and that reach as high as $77.15 a share, more than four times Compass’s IPO price.
Reffkin’s stake propels him from an outsider in the residential-brokerage business to one of its most successful executives. By comparison, Ryan Schneider, the CEO of Compass’ competitor Realogy, earned about $9 million in both 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 becomes a billionaire,” Jay Ritter, a finance professor at the University of Florida, told Insider, speaking of the relative scarcity of billionaires that are minted in IPOs.
The IPO opens up a new chapter in Reffkin’s ascent. After he earned an undergraduate degree and MBA from Columbia University, Reffkin took prestigious positions at the business-consulting firm McKinsey, the investment firm Lazard, and George W. Bush’s presidential administration, where he was a White House fellow in the Treasury Department. At Goldman Sachs, Reffkin rose to become chief of staff to Gary Cohn, who was the firm’s president and chief operating officer at the time.
But Compass’ IPO appears to have been diminished by concerns over its plans to achieve profitability. Since its founding, Compass has lost about $1 billion, including $270 million in 2020. It imagines growing into ancillary businesses, such as mortgage brokerage, that are packed with competition. Other products that pad its revenue, such as a lending business that allows sellers to renovate their homes to reap higher sale prices, are also offered by rival companies.
It has also rapidly grown its revenue by 20 times — from $187 million in 2016 to $3.7 billion in 2020 — and its market share of US home sales by dollar volume from 1 to 4% between 2018 to 2020, according to the company’s S-1. Those figures suggest the firm will be a growing force in the roughly $100 billion market for commissions on residential-real-estate transactions paid annually in the US.
“Most real-estate brokerages are growing in the single-digit percentages,” said David Walker, the CEO and cofounder of Triplemint, a New York City brokerage firm that, like Compass, seeks to use technology to augment the productivity of its brokers. “Compass is growing 10 times faster.”
The Japanese technology investor SoftBank, which took a much-publicized financial blow from its investment in WeWork, stands to reap a gain from Compass. The firm, which invested over $400 million in Compass, could earn about $2.3 billion in the IPO, according to Compass’ S-1. Allon, Compass’ cofounder, holds shares worth nearly $344 million.
Another one of Compass’ largest shareholders is the hedge fund Discovery Capital Management, which owns over 33 million shares, which could be worth nearly $600 million.
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