SoftBank-Backed Compass IPO Raises $450 Million at Low End

Real estate brokerage Compass Inc. priced its initial public offering at the bottom of a reduced range to raise $450 million.

The company backed by SoftBank Group Corp.’s Vision Fund sold 25 million shares for $18 each, according to a statement confirming a Bloomberg News report. Earlier Wednesday, the company slashed the number of shares to be sold and lowered its target range to $18 to $19, after marketing 36 million shares for $23 to $26.

Compass, led by former Goldman Sachs Group Inc. banker Robert Reffkin, has a market value of about $7 billion based on the outstanding shares listed in its filing. Fully diluted to include employee stock options and restricted stock units, Compass would have a valuation of about $9 billion.

The IPO raised less then half of the company’s earlier target, signaling a potential decline in investor enthusiasm about technology transforming the business of buying and selling homes.

Compass, which raised more than $1.5 billion from SoftBank Vision Fund and other investors, touted its appeal to real estate agents, promising they could save time by relying on its software for scheduling home tours, designing marketing materials and communicating with clients. It has invested heavily in engineers to build artificial intelligence that pulls agent tools together, arguing that the technology can save agents time, help them provide better service and make them money.

New York-based Compass is also backed by Discovery Capital Management, its filings show.

Revenue Jump

Last year, Compass was involved in residential real estate transactions totaling $152 billion -- or 4% of the U.S. market, according to its IPO filing. Its revenue jumped 56% from a year earlier to $3.7 billion. More than 19,000 agents use its platform, the company said.

Compass, which was valued in the private market at $6.4 billion in 2019, reported a $270 million net loss for last year as it invested heavily in research and development. It plans to spend the IPO proceeds on research and development, sales and marketing, and potential acquisitions.

The listing follows an equities rout in the past week that had affected mostly technology companies and was intensified as hedge fund Archegos Capital Management was forced into liquidation due to a margin call. Stocks rebounded Wednesday.

The Compass offering is being led by Goldman Sachs, Morgan Stanley and Barclays Plc. Compass plans for its shares to begin trading Thursday on the New York Stock Exchange under the symbol COMP.

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