Alexa, definite BTFD in corporate mergers…

Compass has one goal… and that goal is to vaporize every mom-and-pop broker still clinging to life in this real estate market. How? By swallowing Anywhere Real Estate… a.k.a. the bloated corpse that owns Century 21, Coldwell Banker, Sotheby’s, and half the cesspool of other brands. The deal tags the combined beast at roughly $10B, making Compass the largest residential brokerage in the U.S. by a friggin’ mile. 

(Source: Giphy) 

In short, Anywhere shareholders are getting papered over with Compass stock (1.436 shares each, valued at $13.01). However, post-merger…Compass investors will hold 78% of the new Frankenbroker while Anywhere’s crew gets 22% and a bottle of lube. Which brings me to the scale of it (read: it’s absolutely absurd). 340,000 real estate agents across 120 countries, pushing $400B+ in annual sales volume. That’s what Compass is getting and it’s double the size of their closest competitor. Some call it a mega brokerage… I call it a realtor pyramid scheme so big it makes Herbalife look like a lemonade stand. And CEO Robert Reffkin is sitting at the top with God-level control of U.S. housing transactions.

(Source: Realtor.com) 

But, but, but… why now? Because the real estate market is dead. Sales of existing homes hit their lowest levels since 1995. Mortgage rates kneecapped affordability. Sellers are sitting on golden-handcuff mortgages they’ll never ditch. It’s a wasteland. So what do you do when the market shrivels? You do what any wise elder in the Wall Street Bets colosseum preaches: “BTFD!” 

And that’s what Compass is doing. All while projecting $255M in cost cuts and absorbing Anywhere’s side hustles that include title, escrow, and relocation to pad revenue. So expect a  billion in extra sales from those bolt-ons, assuming anyone can afford to move at all. With that said, investors were less horned up over the initial news. Compass stock tanked 12% on the announcement while Anywhere popped 50%. Exaggerate, much?

(Source: Giphy) 

To be fair, I can see why Compass shareholders had a minor heart attack over the news. But looking deeper, Compass expects to close 1.2M transactions annually after the merger… clinching them as a state-sponsored housing cartel. Translation: At this point, if you want to buy a house in America, you’re basically funneling a commission to Compass whether you like it or not. And over the long run, that’s going to make investors real… real happy. For now though, keep your eyes on Compass as shares are back up +2.27% on the day and place your bets accordingly. Until next time, friends… 

At the time of publishing, Stocks.News does not hold positions in companies mentioned in the article.