Stock option programs sound good on paper, but as we can see with Compass, the reality varies. The post-IPO performance of Compass’ stock highlights the primary issue with stock as a recruiting tool.

This story was republished with permission from the author.

Compass‘ stock price has declined significantly since its IPO; it was the worst performing stock among its real estate peers over the past three months. And while stock prices certainly fluctuate, the decline has a significant, real world impact for the Compass agents who participated in its agent equity program.

A bumpy IPO

Compass’ stock has had a rough ride since its IPO on April 1, 2021. The company originally planned to price its shares between $23 and $26, valuing the company at $10 billion. With muted demand from investors, it revised down to $18 a share with a valuation of just over $7 billion for the IPO.

Compass’ stock has generally declined since its debut as a public company. It’s currently trading at around $13.30 per share with a market cap of $5.2 billion — significantly less than its last private valuation of $6.4 billion set by investors in July 2019.

Unlike any of its public real estate peers, Compass is worth less today than it was two years ago — an outlier in the high-flying world of real estate tech stocks.

The agent equity dilemma

Compass’ stock price is especially relevant to agents who participated in its agent equity program, which allows agents to convert a portion of their commission into company shares. Compass agents invested $70 million into this program during 2018 and 2019 (the 2020 figure is unknown).

Any shares issued after July 2019 were valued at the company’s valuation at that time: $6.4 billion or $154.26 per share ($15.42 per share after accounting for a stock split).

The point is that Compass stock is worth less today than it was in 2019, meaning agents who invested into the agent equity program since then have lost money on their investment (even accounting for a 10 percent company match).

Strategic implications

Compass’ growth story is impressive, and building a multibillion-dollar business is a noteworthy achievement. There are many individuals and organizations that made lot of money from the Compass IPO. But it’s not a linear, upward trajectory to riches, and there are definitely winners and losers.

Stock option programs sound good on paper, but the reality varies. The post-IPO performance of Compass’ stock highlights the primary issue with stock as a recruiting tool: it only pays if the stock goes up.

Mike DelPrete is a strategic adviser and global expert in real estate tech, including Zavvie, an iBuyer offer aggregator. Connect with him on LinkedIn.

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