With a warm and confident smile, eXp Realty founder Glenn Sanford gives off a nerdy, awe-shucks vibe. The 53-year-old Gen Xer has a twinkle in his eye like a character out of the 1992 movie Wayne’s World. He lives in Bellingham, Washington, where the town’s motto is “The City of Subdued Excitement.”
But underneath the understated veneer lies a savvy businessman, an imaginative technologist and a financial whiz — a triumvirate of skills that accounts for his success.
Earlier this week, eXp announced a two-for-one stock split. Shares soared more than 20 percent after the announcement. Today, the company is valued at $6.8 billion, bringing Sanford’s net worth on paper close to $2 billion, and that of his ex-wife, Penny Sanford, almost $1.5 billion.
Something quite personal helped Sanford gain entry into the residential real estate billionaire club.
He purportedly has been motivated by a drive to “beat” Gary Keller, his former mentor who snubbed Sanford a dozen years ago by not including him in an elite Keller Williams mastermind group. Keller also allegedly would not allow Sanford to buy a KW market center.
Those slights, some observers say, served as personal motivations for Sanford in growing his empire. Agents are flocking to eXp, with many of them being peeled away from Keller Williams. Sweet revenge.
What attracts agents to this rather unique brokerage?
A generous 80-20 commission split — and even a piece of the 20 percent, if the agent brings in other agents. That ongoing upstream revenue source eats away at eXp’s net income. But that has not bothered Wall Street investors because the agent and revenue growth rates have been staggering.
eXp is a growth story with a momentum stock, jumping from a split-adjusted 73 cents a share five years ago to $97 today — a 100X return. During that same period, Zillow shares saw a 7X return.
If an agent bought 10,000 shares in 2016 for $7,300, those shares would be worth almost $1 million today. EXp is minting real estate millionaires, and that is helping the company build its agent network. Further, it enjoys a cult-like culture, something that’s happened before in real estate — think of the yellow jackets at Century 21 in the 1960s and 1970s, the RE/MAX juggernaut in the 1980s and 1990s and with the Keller Williams rock-and-roll growth curve in the last 12 years.
Why? Agents often find themselves alone in the world and many of them need a company that not only delivers the goods but also gives them a bigger vision to follow. Plus, Sanford has proven that an office is no longer critical for creating a connection and loyalty to the mothership.
Sanford is more complex than what meets the eye
He learned a lot at the knee of his father, a stock broker who made a business out of reverse mergers — shoving companies into the shell of an existing publicly traded but dormant or sputtering business. Often they were Canadian penny stocks. Sanford worked with his father early in his career, learning the ways of publicly-traded companies.
Fast forward a dozen or so years and Glenn used those lessons to take eXp public by putting it into Canadian penny stock company Desert Canadian LTD. Often these stocks can be “pump and run” operations that attract speculative investors with little to no transparency as to how the companies operate.
Think of it as a SPAC (Special Purpose Acquisition Company) before there were SPACs. Now, what was once the underbelly of Wall Street has gone mainstream.
Sanford’s financial engineering has paid off
Sanford has used shares of stock over the last 10 years to attract agents to join his growing enterprise. Three years ago, eXp started trading on the more reputable Nasdaq exchange. (Before, it traded on the OTC, the over-the-counter penny-stock exchange.)
Sanford also made sure he controlled the fate of the company. Together with his ex-wife, he owns more than 50 percent of the enterprise, so he can do more or less whatever he wants with company decisions. It is not too much different than the control Rich Barton and Lloyd Frink exercise over Zillow or Mark Zuckerberg over decisions at Facebook, though each of those companies did so by issuing two classes of stock. None of them have such a large outright stake in their companies, as Sanford does.
What he finds himself in command of today is an online platform with one owner and one simple business model. Most importantly, it scales. As a broker, Sanford controls his own destiny. No middle tiers of authority, territories or market centers to deplete or confuse his control over the company.
He also has that unique capacity to see around the bend. Sanford was one of the first people to build a successful team under KW. He was also one of the first successful expansion team builders and mastered SEO in the early days of the internet to capture leads.
He is the only big real estate company CEO who can write software code.
eXp acquired Virbela, the 3-D, fully-immersive, cloud office environment, for $11 million in 2018 after becoming its largest customer. COVID made that bet a sure thing. Now, the company is licensing the platform to other companies and government agencies. And like the cloud computing business boom at Amazon and Microsoft, this could be an entirely new source of revenue for eXp.
There is also a pony in the company’s plan to go global. By offering much better commission splits than typically found in other countries, eXp can expand internationally quickly, much like the franchise giants did in the 1980s. But even easier with its virtual platform, reducing the friction around office locations and branding.
The only thing that could trip up this amazing growth story is if the growth were to stall. Then the eXp empire could take a hit or even come tumbling down as the incentive for agents to stick around would be diminished. The eXp narrative depends on growth. For now, the booming stock is something many agents want in on. They watched technology companies grow and make many millionaires and even billionaires, but not agents.
They have been left out in the cold, even though they are doing most of the work that created these online tech giants. Agents have no upside in the equity of these companies. KW mastered revenue sharing, but eXp has added the equity wrinkle for agents. A booming stock market has made the offer even more attractive. And agents buying eXp shares has helped boost the stock, creating a virtuous cycle.
Before eXp, Sanford tallied a few business wins, but he also started many companies that went nowhere. His story is about how all of these varied experiences came together to make eXp.
I guess it is not a surprise that he has a new side gig as CEO of Success magazine. It’s a quirky move, but then Glenn is a quirky guy.