Compass scales back employee stock awards after shares plunge
Firm to to distribute stock more slowly, meaning longer waits to cash out
Compass, the residential brokerage that tops all others by closed sales, pumped the brakes on equity compensation for employees after its stock price plunged almost 70 percent since it went public a year ago.
CEO Robert Reffkin announced the shift in an internal email verified by The Real Deal. The changes cut the initial amount of stock that eligible employees receive as they rise through the ranks and make them wait longer to sell the full amount of their awards.
Compass will grant employees a quarter of their stock award each year, and they can sell each grant after one year rather than wait four years for it to fully vest. The changes won’t affect brokers who aren’t employees.
“I hope and believe that we, along with the broader market, will not find ourselves in a similar situation over the coming months and years,” Reffkin said in the email he sent earlier this month. “However, we are here now.”
The 10-year-old company spent lavishly to grow rapidly, leading to escalating quarterly financial losses as equity compensation offerings, once eyed as a recruiting tool, drained its balance sheet, costing it more than $90 million in the fourth quarter. Reffkin’s own net worth plunged by more than $310 million as the stock tanked.
Compass shares were trading at $6.66 as of 11:30 a.m. Friday in New York, up from a record low of $5.66 on Wednesday. The stock hit a high of $21 shortly after debuting last April. Reffkin has blamed inflation as well as rising interest rates as an uptick in housing construction presages a softer housing market. Rival Douglas Elliman’s shares have lost almost a third of their value since the firm went public at the start of the year.
Stock awards are common, especially for startups more willing to record a stock expense than pay out cash. Robust equity programs help companies recruit talent by offering employees stock in addition to a salary.
A slower award rollout provides a way for Compass to stem the financial loss it has taken from its employee equity program. Compass expensed $93.4 million worth of non-cash compensation on its balance sheet in the fourth quarter, making up more than half of its $175 million loss.
UPDATE, 3/18/2022, 2:15 p.m.: This story has been corrected to clarify details of when and how employees can sell awards.