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While technologies such as artificial intelligence provide many conveniences that we take for granted, certain sectors – such as real estate – remain largely stuck in the “analog” age. This is where Compass aims to rethink this ancient industry. Described as a comprehensive platform for residential real estate agents, Compass achieves multiple competencies for 19,000 agents under its responsibility.
As the largest independent real estate brokerage firm by total transaction value, Compass commands a market share of 4%. Not surprisingly, its initial public offering (IPO) generated intense interest, although valuation concerns persist as the stock settles.
When did you do the compass subscription?
Compass went public on April 1, 2021, with three classes of stock. The IPO itself listed Class A shares, which have one vote per share, while Class B shares have no voting rights. Class C stock ownership gives 20 votes per share.
financial history compass
Although the underlying AI technology that may disrupt the real estate industry is imposing, Compass’s main challenge involves its unbridled valuation. According to the company’s revised S-1 prospectus, management has requested a $10 billion valuation for the IPO. Compass will offer 36 million Class A shares in the initial public offering. In the end, the shares were floated at $18.
Since 2012, Compass has generated $300 billion in total transaction volume. In 2020, it generated $3.72 billion in revenue, an increase of 56% year over year. Compass also trimmed its net loss last year to $270 million from $388 million in 2019.
However, you must ask, is this assessment justified? Consider the case of Realogy (NYSE: RLGY). While Compass’ marketing efforts are arguably superior, Realogy essentially offers a similar solution – a full-service provider that helps real estate agents become more productive.
However, the stark fact is that Realogy amassed several profitable years and generated more revenue in 2020 ($6.2 billion) while its market capitalization was less than $2 billion.
The hype surrounding the compass leaves no doubt that investors are fascinated by the compass. Since 2012, Compass has raised $1.5 billion over 10 private funding rounds. Notably, in 2018, major investors helped the Qatar Investment Authority and SoftBank’s Vision Fund raise $400 million in a Series F round.
Moreover, social media has recently shown the immense power of the internet. By exchanging ideas across different forums, bloated stocks can have tremendous emotions. The Compass IPO certainly has the potential to benefit from this synergy.
But there are also many concerns about this upcoming debut. Besides the valuation argument, the compass depends on the economy moving in an upward trajectory. Also, to justify the valuation, the company needs interest rates to remain low to incentivize buyers to ignore the potentially overheated real estate market.
Unfortunately, the evidence is that the economy is heading towards a deflationary environment. The key among the data is the velocity of money, or the rate at which each unit of currency rotates in the economy. It’s near an all-time low, which means consumers are saving money, not spending it.
This is a huge economic red flag that you should not ignore.
How to buy compass shares
If you already know how to buy stocks, you can search right away. If you need more instructions, you can follow the steps below.
Step by step guide:
- Choose a brokerage.
Most brokers now offer similar incentives for you to join, such as commission-free trading. Therefore, the decision is largely down to the lifestyle and where you see yourself as an investor. If you work with a hectic schedule, then a mobile trading app might be the most suitable platform. But if you want to develop your investing acumen, you should opt for a full-spectrum service.
- Select the number of posts you want.
Deciding how many shares to buy is a personal factor, and often it boils down to risk tolerance and account size.
Regardless of your decision, your number should be specific before trading. This way, you are less likely to be distracted by market noise in making emotional transactions.
- Choose your order type.
Before placing your order, you should familiarize yourself with these market concepts, especially the types of orders.
• tenderBid: The maximum price a buyer will offer for the stock. It is always less of a question.
• Request: The question is the minimum price that the seller will take. It is always higher than the bid.
• diffuseThe spread is the difference between the bid and ask prices. It is also a measure of market liquidity because it represents the risk-reward ratio of the market maker to perform its intermediary services between buyers and sellers. Narrow spreads indicate more liquidity while wider spreads indicate less liquidity (which characterizes risky asset classes such as small stocks).
• Limited demandLimit orders are executed at a pre-set price, facilitating maximum control and transparency in your trades. The disadvantage is that there is no guarantee that the stock will reach the stated price, which may leave your order pending without execution.
• market orderMarket orders are executed at the next available price, which is useful if you want to secure yourself a position in the target stock. The disadvantage is that market orders fulfill at least the rates that are convenient for you, as in the case of buy orders at the ask price and orders for selling at the bid.
• stop loss order: A stop loss order automatically exits you from your holdings at either a pre-set price or the next available price. While this protective function gives you peace of mind, if you open a new session at a much lower price than the previous session’s closing price (gap-down session), you may incur a much larger loss than expected.
• Stop-Limit command: Stop-Limit orders only fulfill the pre-set price, which prevents surprises associated with stop-loss orders. But like limit orders, you will likely risk leaving your stop limit hanging unexecuted.
- Carry out your trade.
To execute your trade, follow these steps for a market order:
• Select the type of action (buy or sell).
• Enter the shares you want to acquire (or sell).
• Click on the Execute button.
Placing limit orders follows the same process as above but you will need to include your desired execution price.
Best Online Stock Brokers
Here are the best brokers to consider.
Companies like Compass are starting to bring the real estate industry to 21St a century. Compass offers a comprehensive platform that helps real estate agents secure deals quickly and efficiently, and organically assists buyers and sellers in what is usually a cumbersome process.
Since the compass has serious backing, it has serious potential. However, you should be aware that other competitors offer similar platforms for what might be a more reasonable assessment.
0 commissions and a minimum without deposit. Everyone gets smart tools for smart investing. Webull supports full long hours trading, which includes full pre-market sessions (4:00 AM – 9:30 AM ET) and after hours (4:00 PM – 8:00 PM ET) sessions. Webull Financial LLC is registered and regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). It is also a member of SIPC, which protects (up to $500,000, which includes a $250,000 cash limit) against the loss of cash and securities a client holds in a financially distressed SIPC member’s brokerage firm.