Real Estate

Compass Denies Reports Of Private Equity Takeover

An Insider report published Wednesday evening cites three unnamed sources who said Vista Equity along with another private equity company could be involved in a deal.

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Compass is denying reports that a deal is being explored with Vista Equity Partners to take the brokerage private.

An Insider report published Wednesday evening cites three unnamed sources who said another private equity company along with Vista Equity could be involved in the deal.

Vista declined to comment to the publication and did not respond to Inman’s request for comment. A Compass spokesperson denied any such deal was in the works when asked by The Real Deal on Wednesday.

“Compass has not been contacted by any private equity firms expressing interest in taking the company private,” a spokesperson for the firm said in a statement to Inman. “There have been no talks with private equity firms on this matter.”

Compass did not respond to requests for further comment from Inman on Thursday morning. We’ll update this story as new information comes in.

CEO and founder Robert Reffkin would have to approve any sale of the company, given that he controls half of the brokerage’s voting power.

Compass’ stock has fallen 85 percent since going public last year, and has undergone two rounds of layoffs, with its technology department hit hardest.

The New York City headquartered brokerage reached a market capitalization of $8 billion on its first day of trading but is now valued at just $1 billion following disappointing earnings, including a second-quarter earnings report that showed its losses rise to $101 million.

Following the second quarter report, Compass said that it would implement a “cost reduction” program with the goal of saving the company $320 million. That plan has so far involved the layoff rounds and ditching their stock and compensation packages in recruiting.

The slashing of recruitment packages represented an enormous shift for the company, which despite being founded just a decade ago was able to land at the forefront of the industry relatively quickly;y thanks in part to its aggressive recruitment strategy. That same recruitment strategy also earned the brokerage many rivals, and made it the subject of several lawsuits.

Compass’ roughly 28,000 agents tallied $251.1 billion in transactions in 2021, the highest in the industry, yet the company has remained unprofitable. 2022 has brought a far cooler housing market with mortgage rates rising significantly, putting further pressure on the brokerage’s efforts to turn a profit.

The brokerage attracted millions in investments from high-profile backers including SoftBank with talk of its revolutionary agent technology. But as it struggles to turn a profit technology has been among the first department to take cuts, with an estimated half of its technology department laid off in September after Compass CEO Robert Reffkin told investors on an Aug. 15 earnings call the brokerage would scale back tech and cash and equity incentives.

Compass share surged 11.4 percent during after-hours trading following news of the alleged discussions.

Email Ben Verde

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