Compass sweetens agent stock program for 2020

Brokerage is on track to grant $50M in equity in 2019

Nov.November 06, 2019 04:00 PM
Compass CEO Robert Reffkin
Compass CEO Robert Reffkin

Compass is making it easier for agents to cash in on shares of the company stock.

The Softbank-backed firm announced changes to its agent equity program, which now allows agents to purchase shares of restricted stock that will vest by 2021 — or sooner if the company goes public. Previously, agents could buy stock options that would vest in four years.

“This is an exciting change that eliminates the need for participating agents to pay a strike price to purchase their equity,” according to an internal Compass memo. The change was first reported by Inman.

Although Compass has faced withering criticism from rivals for offering bonuses and equity to lure top agents, the firm only officially rolled out an equity program last year. It said it did so based on demand from agents, and in 2018 Compass granted more than $20 million in options to 1,200 agents that enrolled in the program. This year, 3,000 agents enrolled and the firm is on track to grant more than $50 million in equity, it said.

Under the new program, Compass has shortened the vesting schedule from four years. Now, shares will vest if two conditions are met: the agent is affiliated with Compass in 2021 when the board grants the restricted stock units, and when there is a liquidity event (like IPO or sale). 

But Compass has also lowered the percentage it will kick in to match agent stock purchases. Until now, the company matched each dollar invested with 30 cents. Now it will match each dollar with 10 cents.

To illustrate the new program, the internal memo laid out a scenario where an agent earning $100,000 in commissions invests 10 percent in the equity program. After the Compass match, the agent has $11,000 in equity.

At $154.27 per share — the price of stock in Compass’ Series G round in July — the agent would own 71 shares of the company stock. Compass was most recently valued at $6.4 billion after closing that round. The prior round priced shares at $118.

Compass CEO Robert Reffkin also owns shares of common stock, according to a copy of his stock agreement that was recently disclosed in a lawsuit. In 2012, Reffkin purchased 3.355 million shares at $.0001 each. Although it’s likely he bought or sold some over the years, today those shares would be valued at $500 million.
According to the agreement, 7.5 percent of his shares vested immediately. The rest vested over a three-year period. In connection with any eventual IPO, Reffkin agreed to a six-month lockup period.

In October, Reffkin told The Real Deal that Compass did not plan to IPO for at least 18 months.
“We have enough capital,” he said, “where we don’t need to go public.”

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