Is Compass Being Eyed For a Private Equity Takeover?
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As reported in The Real Deal, who got the information from an online pub called Business Insider, Compass, the tech-oriented brokerage that popped up in New York City and, utilizing significant investor funds bought its way into being one of the country’s largest real estate brokerages, is being eyed for a take-over by a private equity firm.
Bloomberg is also reporting the story.
According to Business Insider, that firm is Vista Equity Partners, founded by billionaire Robert F. Smith. According to Wikipedia, Black Enterprise magazine says Smith is credited with consistently generating a 30 percent rate of return for his investors at Vista Equity from the company’s inception to 2020. Vista Equity Partners was the fourth largest enterprise software company after Microsoft, Oracle, and SAP in 2019. Smith owns homes in Austin, Malibu, California, New York City, Denver, and Florida.
“Compass has not been contacted by any private equity firms expressing an interest in taking the company private,” a Compass spokesperson said earlier this week. “There have been no talks with private equity firms on this matter.”
The Real Deal
Taking a company private often offers many benefits. One is giving executives more freedom to pursue riskier and longer-term projects without the oversight of public shareholders and their demand for rapid profitability. And the company no longer needs to report financial information to the SEC, which many see as an intrusive and expensive burden. Without constraints, some companies are more nimble to soar.
Compass went public in April, 2021, with a $7 billion market cap worth $1.1 billion today. It has been aggressively slashing costs, shedding employees, scaling marketing and other departments, and ending those famous equity grants for new agents. Compass says it aims to cut more than $300 million in expenses this year. Thursday, Compass’s stock closed at $2.96.
But to take the company private would require the buyout of Compass’s largest stockholder, Robert Reffkin, who holds about half of Compass shares. And Compass is outright denying the report.
The Dallas Compass office opened in January, 2018, and grew rapidly with office expansion in Fort Worth, Southlake, East Dallas, Lakewood, Plano, and Frisco. Experts say the Dallas office is one of the most profitable in the U.S.
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This is a totally bogus story. Sorry to see you continuing to spread unfounded rumors
Nancy, we reported that Compass is denying the story. And going private is certainly not a negative. However, when three major publications report this, we cannot ignore it. If it’s a rumor, we will track down the nucleus of it.
Even Jonathan Miller has written about this:The Compass Chronicles: October 2022 Edition
A continuing saga…
A newstorm erupted when it was reported by Business Insider that Vista Equity Partners look at a possible plan to take the company private. This financial engineering is beyond my expertise, but it is yet another questionmark on the viability of a firm that did not make a profit in the biggest housing boom of the modern era. Vita specializes in taking tech companies private.
Vista Equity Partners is exploring a deal to take Compass private, sources say [Insider]
Vista would not comment, and Compass denied it happened. Of course, we’ve been down this road before when Compass denied they gave signing bonuses yet it was common knowledge they were.
Compass Denies Report of Takeover Interest From Vista Equity [Bloomberg]
Compass denies private-equity takeover talks [The Real Deal]
Compass denies talks of private equity takeover [RealTrends]
This is a big part of why the media has lost credibility. They report bogus “stories” based on unfounded rumors and then say they have a responsibility to “report” on things that are nothing but click bait to publications who are paid per click. Repeat that this is a totally fake report.
Business Insider is just doing the bait and click.. You can’t read the article unless you pay.. creating rumors is great for their bottom line. Imagine 30k Compass agents waking up and see this headline and clicking the link to pay for more info. Compass has only been public for 18 months, it’s crazy to think they would give up that quickly
Its Crazy that Compass leader Reffkin said $10B Valuation and a year later it is $1B . For sure not the next Amazon. Maybe it was glow in dark yard signs that crushed earnings or paying agents to recruit talent and golden handcuffing them if they left with penalties. hardly a revolutionary idea.