Masa Son’s SoftBank made what it hoped would be a transformative bet on residential brokerage through its investment in Compass. It’s a bet that has proven extraordinarily costly.
The Japanese investment giant’s Vision Fund disclosed on Aug. 5 that its stake in Compass, for which it pumped in $1.08 billion over three funding rounds, was worth just $543 million as of Aug. 5., wiping out about half its investment. And the current value is likely much lower: Compass shares have fallen 33 percent since then, hitting $2.82 as of market close Thursday, compared to $4.10 as of Aug. 5.
SoftBank co-led Compass’ $550 million Series E round in December 2017, which valued the brokerage at $2.2 billion, according to PitchBook. It also co-led Compass’ $400 million Series F round in December 2018 (at a $4.4 billion valuation) and its $500 million Series G round in November 2019 (at a $6.4 billion valuation).
“With disruptive technology and unique data advantages, Compass is well-positioned for future growth in a sector that represents trillions in transaction volume,” Justin Wilson, then a partner at the Vision Fund, said at the time of its first investment in Compass.
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Compass went public on April Fool’s Day in 2021, selling 25 million shares at a price of $18 per share for a total raise of $450 million. After the IPO, the company was valued at just shy of $7 billion. Its opening day price was $20 a share, but it was all downhill from there – the company’s stock has dropped 86 percent since, and its current market cap is $1.21 billion.
The company disclosed losses of $289 million in the first six months of the year, and said it is looking to slash its costs by $320 million in a bid to become profitable. It has been conducting layoffs, including that of its chief technology officer, and put an end to its equity grant program for new agents.
The $100 billion Vision Fund, led by Rajeev Misra, lost a record $21.6 billion in the second quarter. Its other big missteps include WeWork, with the fund saying that a $3.5 billion investment in the co-working firm was worth just $458 million as of Aug. 5 (SoftBank’s overall investment in WeWork is far larger.)