If it’s true that being rich in friends is to be poor in nothing, then Compass CEO Robert Reffkin has nothing to worry about.
Compass brokers rallied to the company’s defense Tuesday, a day after a dour earnings report revealed it lost over $100 million last quarter and nearly $300 million in the first half of the year.
In interviews and Instagram comments, brokers brushed off concerns about the company’s future, or its ability to provide them support. But agents, who are independent contractors, acknowledged that the drumbeat of bad news worries Compass employees.
“You know who cares about that? Staff,” said Lee Mintz, a Los Angeles-based Compass broker, in a phone interview. “They’re paid employees, they’re the ones that are going to get affected by anything. [For] agents, the only things that are going to get affected are our stocks, and all my stocks are down.”
Meanwhile, rivals and critics seemed to relish the company’s struggles after years of witnessing Compass spend truckloads of investors’ money to grab personnel and market share.
“What they’re doing, it doesn’t make sense,” Bess Freedman, CEO of Brown Harris Stevens, told Bloomberg.
Some agents from competing firms took to The Real Deal’s Instagram page to gloat.
Victor Ahn, managing director of Calabasas Coldwell Banker Realty, posted he was “just here for the Compass agents that attacked me years ago for having an opinion that didn’t align with their living god Robert Reffkin.”
Other industry figures went further.
“Just absurd… financial negligence,” wrote Marcus Lemonis, a real estate entrepreneur and HGTV star.
But Compass agents were up for the scrap. Michael Gates of Savannah, Georgia, pointed out that the firm finished the second quarter with over $430 million in cash and $300 million in untapped credit. Compass had over $600 million in cash at the end of last year.
Phillip Salem, who defended the brokerage on Instagram, said in a phone interview he stays for the culture.
“They allow me to market myself as who I am without telling me how to look, how to dress, how to talk,” said Salem, who’s based in New York. “It’s the reason I’m still a real estate agent. I don’t think I could ever go to another agency.”
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Although the company announced a “significant cost reduction program” yesterday and the end of expensive recruitment tools like generous commission splits and equity incentives, it’s doing what it can to keep people from jumping ship. Reffkin sent a letter to brokers yesterday assuring them no support positions would be eliminated. He also took the unusual step of promising that the company would not run out of money.
“I would never leave Compass. I would only leave if the company folded and it’ll never fold,” said Mintz. “I’ll always get the support I need. My team will always get the support they need.”
One cutback announced Monday that will directly affect brokers is a cap on Compass’ concierge program: It will limit renovation investments to $15,000, down from $75,000.
“It still goes a long way,” said Bridget Elkin, a Compass broker on Long Island’s North Fork, referring to the $15,000. “That could be someone’s whole interior painted — that’s the most important piece.”
Eugene Litvak, who runs a Brooklyn-based team at Compass, said, “When things slow down, you’ve got to pull back on expenses in the way that least impacts the company. I’m not really shocked by a business doing what a business is supposed to do.”
Litvak said he still has “a great deal of confidence” in the company.
But investors and analysts don’t. Compass stock dropped precipitously on Monday’s after-the-close earnings report and lower revenue forecast, falling as low as $3.95 a share Tuesday morning after closing at $4.67 the day before.
Mike DelPrete, a real estate analyst (and an investor in Compass rival Side), pointed to the company’s higher-than-expected cash-burn rate as a major concern.
“To become cash-flow-positive, Compass is making major cuts — the question is, can it do so while still remaining attractive to, and providing the same value to, its agents?” he wrote in an analysis in his newsletter.
Some investors think it can — or at least that its stock has upside after losing 80 percent of its value. They bid the share price all the way back to $4.66 Tuesday afternoon before it slipped a bit to close at $4.45.