Realogy, the biggest U.S. real estate brokerage, on Monday took the unusual step of disclosing to the Securities and Exchange Commission an company memo sent by CEO Ryan Schneider to his employees outlining something that wasn’t going to happen.
The internal memo issued on Saturday was a response to a Friday court filing by smaller rival Compass claiming that Schneider had discussed selling his company. In 2018 Realogy handled $176.4 billion in real estate transactions, and Compass was involved in $45.5 billion of sales, according to REAL Trends, a real estate data firm. Realogy filed suit against Compass in July alleging it engaged in illegal activities in a bid to edge out its competitors “at all costs.”
“On Friday night, as we expected, Compass filed a motion to dismiss our lawsuit,” Schneider said in the memo. “Not surprising to us, they issued a media statement designed to inspire sensational news coverage about Realogy that is simply not true. Compass’s misleading statement was clearly designed to create distraction for Realogy employees, agents and franchisees on which they could later try to capitalize. While we generally do not comment on pending litigation outside the company or even within the company, we want to be clear with you that we have never had discussions to sell or merge Realogy with Compass.”
Compass told the court in the Friday filing that if Realogy’s suit wasn’t dismissed it would file counterclaims based on “a meeting arranged by Realogy CEO Ryan Schneider in which Schneider discussed that he had considered selling the company.” Compass did not return phone calls and emails from HousingWire seeking comment.
Realogy is not the first to take Compass to court for allegations of illegal and unfair business practices. On July 10, the same day Realogy filed its suit, Compass settled a pair of lawsuits, without making any public statements, in which Zillow had accused it of poaching employees and data theft.
Compass has made a splash in the last seven years, raising millions of dollars from investors such as Fidelity and SoftBank by billing itself as the “first modern real estate platform.”
“It lures the industry’s top talent with lavish signing bonuses and specializes in high-margin, luxury homes in upscale, coastal markets,” a Bloomberg article said in 2017. “The much-touted technology is, according to several agents, not that different from what other brokers provide.”
Compass was co-founded in 2012 by Ori Allon, who sold previous startups to Google and Twitter, and Robert Reffkin, who had risen through the ranks of Goldman Sachs to become chief of staff to the investment bank’s president.
In late July, Compass announced it had raised $370 million in its latest funding round. The investments valued the company at $6.4 billion and indicated it was nearing an initial public offering, according to a Wall Street Journal story.
“New York-based Compass has shaken up the real-estate brokerage industry in recent years by luring top agents with generous commission splits and stock options and, more recently, fronting sellers money to spruce up their homes for sale,” the WSJ’s July 30 story said. “The firm’s deep pockets have left incumbent competitors struggling to keep up amid a slow housing market and shrinking margins.”