Since Compass’ initial public offering in April, the company’s stock (NYSE: COMP) has struggled to match its opening day performance of $20.15 per share. Despite this, stock market analysts have remained quite bullish about Compass’ ability to bounce back, thanks to two consecutive quarters of solid earnings results with growing revenue and narrowing losses.
With analysts still on their side, Compass is facing its greatest stock market test yet — the closing of its 180-day lockup period for investors, which includes vested Compass agents and employees, and institutional backers such as Softbank, which owns a third of the company.
“It’s an indication of how much faith they have in the business,” Forbes contributor and investing expert David Trainer told The Real Deal on Monday of the significance of the lockup period.
As of Tuesday, Compass has 215.15 million public float shares, which are the number of shares actually available for trading after subtracting closely-held shares. Compass investors are short 6.16 million shares or 2.90 percent of the traded float, which means long-term investors are showing their faith in the company’s prospects by holding onto their shares.
On the other hand, a higher float (25 to 40 percent) is generally better for individual investors who are looking to get their share of the pie at a lower price and earn a handsome penny if or when the stock rebounds.
Although a lower or higher float percentage isn’t inherently good or bad, Investopedia explained, a sudden increase in the float percentage usually signals a rough road ahead. “If the float suddenly shoots up, though, it could mean that company insiders or institutional investors have a lack confidence in the stock or are not completely committed to managing its price,” Investopedia’s explainer read.
Compass’ float percentage has remained steady over the past three months, with the company’s float percentage remaining between 2 percent and 2.95 percent. That percentage could change in the coming days, Oppenheimer analyst Jason Helfstein told The Real Deal; however, he still expects Compass’ stock to rebound to the target consensus price.
“Helfstein said he expects Compass to repeat the pattern that generally plays out when insiders are able to begin trading their IPO holdings: share prices tumble as the lock-up period ends and then subsequently rally,” TRD explained.
According to investing platform MarketBeat, analysts’ confidence in Compass is remaining steady with seven “buy” ratings and two “hold” ratings. The target consensus price range has risen over the past month as well, with the target low increasing from $17 to $19 per share. The target high has risen from $28 to $32 per share, and the median has risen a modest $0.38 to $23.38.
Yahoo! analyst Thomas Hughes said Compass is poised to near its IPO price per share by the end of the year, with the company’s ability to stay trading above the $16 range in the coming months being the bellwether. “If support is able to hold at the $16 level, we see this stock moving up to the $20 level at least,” he told Inman in August. “Looking forward, strong results in the third and fourth quarter are expected and should help lift price action above the $20 level and up to new highs by the end of the year.”
Compass’ stock hasn’t been able to hold at the $16-range, with stocks dipping down to the $13-range throughout September. However, Compass’ stock could experience some pops (i.e. sudden, temporary increases) in the coming months, especially as Compass agents face the end of their lockup on April 26, 2022.
It’s unknown if those pops will translate into any long-lasting or meaningful increase in Compass’ price per share, as it’ll still take a couple more years for investors and analysts to have a clear and well-rounded view of what lies ahead for the tech-focused giant.
“At a minimum, we need to wait until we get through the period of time when the insiders are allowed to sell, [which is called] the lockup period,” Trainer told Inman in April.” I would wait at least until the lockup period is done to see how much the insiders are willing to hold on to the shares. But normally we’re talking about at least one to three years [to see how they perform.]”