Vista Equity Partners is exploring a deal to take the residential real-estate brokerage Compass private, according to three people familiar with the discussions.
The people asked to remain anonymous because they weren't authorized to speak about private deals.
Another private-equity firm could also be involved in the deal, which might include a property technology startup to bolster Compass' digital offerings, the sources added.
Vista declined to comment.
A Compass representative said that "no private-equity firm has contracted Compass expressing any interest in taking the company private" and that there had been no talks with private-equity firms about any such deal.
Compass' stock price has plunged more than 85% since the company went public last year. Founded in 2012 by Ugo Di Girolamo, Ori Allon, and Robert Reffkin, Compass raised $450 million in its New York Stock Exchange debut last year.
It reached a market capitalization of $8 billion on its first day of trading but is now valued at just over $1 billion after disappointing second-quarter results and two rounds of layoffs. Also putting pressure on Compass' efforts to turn a profit for the first time is a cooling housing market, with fewer homes trading hands and listings experiencing price cuts.
Reffkin, Compass' CEO, would have to approve any sale, as he controls about half of the voting power of the firm.
High-profile venture investors, including SoftBank Group, poured hundreds of millions of dollars into Compass, which touted itself as not just a pen-and-paper brokerage but a modern tech-forward real-estate company that was worthy of trading with a lofty multiple.
But in the past year, Compass has faced questions about how revolutionary its technology really is, drawing unfavorable comparisons to another SoftBank-backed company, WeWork. The company is now valued by the public markets at hundreds of millions of dollars less than the private investments poured into the company over the past decade.
Compass' roughly 28,000 agents were involved in $251.1 billion worth of transactions in 2021, the most in the industry, but the company was unable to reach profitability, reporting a $494 million loss in the year. The company has spent this year cutting costs as the housing market slows, laying off 450 administrative and marketing employees in June and cutting 750 tech-team members in September.
On an August 15 earnings call, Reffkin told investors the company was working toward profitability and would be scaling back its investments in tech and in cash and equity incentives that helped the firm attract high-performing agents. The chief technology officer Joseph Sirosh, who left Microsoft to run Compass' tech operations, was let go shortly after the call.
A former Compass employee who was laid off in June told Insider the cuts happened abruptly and some within the company questioned leadership's commitment to the staff.
The broader market volatility and plummeting valuations have presented an opportunity for private-equity firms to snap up fast-growing companies at bargain-basement prices, particularly in the tech sector. Private-equity firms globally spent a record $220.83 billion on deals to take companies private in the first half of 2022, up from $162.81 billion in the same period last year, according to data from Dealogic.
Vista has taken numerous tech companies private this year, including an $8.4 billion deal for the tax-software company Avalara and a $16.4 billion deal for Citrix.
Compass wouldn't be the first major real-estate brokerage to be taken private during a period of turmoil in the housing market. The mega-investor Apollo Global Management took Realogy, a parent company of brokerages including Corcoran and Sotheby's, private in April 2007 on the eve of the financial crisis for $6.65 billion. Apollo eventually made $1.3 billion in profit on the deal when Realogy, now renamed Anywhere Real Estate, went public again in 2012.
