What Is Happening At Real Brokerage

Real Brokerage has boasted exponential growth in recent years, rocketing to the fifth-largest residential firm in the country. But more recently, the company’s financial filings have shown some concerning patterns in the background.

Former chief financial officer Michelle Ressler filed a lawsuit against the firm earlier this month alleging pregnancy discrimination. Ressler, who claims the company pushed her out three months after returning from maternity leave, also hinted at broader operational issues within the company, alleging that she was also ousted for challenging the company’s “questionable and potentially unlawful conduct.”

The company’s stock price has been on a year-long slide and its generous equity programs for agents have led to stock dilution issues beyond its other publicly-traded peers.

In the last three months, chief executive officer Tamir Poleg has also sold over $3.3 million in stock. Its largest investor Insight Partners, which announced a large planned selldown for July, instead abandoned ship in May.

“Each one of these things alone is something that happens in the normal course of business operations,” said industry analyst Mike DelPrete. But taken together, they do “catch one’s attention,” he said.

A growing business

At first glance, the company’s top-line numbers have only improved in recent years.

Despite its recent slide, the company’s stock is still trading at over four times its initial public offering price. It closed Wednesday at $4.29. It was the fifth-largest brokerage by volume last year with over $42 billion in closed deals, doubling its volume from 2023 after nearly doubling it the year before from 2022.

But leading up to Ressler’s bombshell lawsuit, the firm started showing signs of cracking.

The brokerage broke in with its explosive agent growth totals on the back of its generous splits, equity package and revenue sharing arrangement, similar to what eXp Realty offers its agents. Real Brokerage agents receive an 85/15 commission split until they pass on $12,000 to Real — after that, they keep 100 percent of their commissions, and pay a small transaction fee on each deal (teams receive an even lower commission cap amount).

Agents also can receive a 5 percent revenue share generated by producing agents they recruit to Real up to a certain point, which comes out of Real’s commission split. Additional revenue share can come from producing agents recruited by the initial recruits.

Real also entices agents to buy into the company, providing a number of equity incentive programs to agents. Agents can set aside part of their commission to buy Real stock, which the brokerage encourages by giving the agents bonus shares when they do so, and receive stock for recruiting other agents, hitting the commission cap or receiving company awards.

Falling value

Those aggressive equity incentives are not without cost.

In 2024, the brokerage’s stock was diluted by 10 percent, according to an analysis by DelPrete shared with The Real Deal. That was nearly double the median annual dilution of seven other competitors, including eXp, Anywhere Real Estate and Compass, he said.

“The other part of making [equity incentives] work at scale is you need to repurchase shares,” DelPrete said. “You should be buying shares back too, so you’re not just constantly diluting the value.”

Real spent roughly $36 million in 2024 — nearly as much as the $49 million it generated in free cash flow — buying back shares, according to its public filings.

CEO Tamir Poleg said in an interview that buybacks “should completely offset all of the potential dilution and we want to get to that point, not in the very far future.”

In 2024, the company recognized over $52 million in stock-based compensation paid out to agents and employees through its compensation plan and another nearly $10 million in restricted shares granted through incentive plans.

“The opportunity for equity ownership is a core part of our agent value proposition,” the company said in a statement.

Poleg also noted that the company has reduced its equity incentives since 2020 and that investors have told him they are “comfortable with a low single digit dilution as long as the company is growing so rapidly.”

“Longer term, we will continue to trim down our equity incentive program so that dilution becomes even lower than it is today,” he said.

The company appeared to address these concerns in a May 20 press release when it announced a program to buy back $150 million in shares. But the release gives no indication of when that program will go into effect, and the company’s cash balances fall far short of that number, with roughly $35 million in cash and cash-like investments on its balance sheet to end the first quarter.

Poleg said that the plan “provides us the flexibility to execute over multiple years,” and pointed to Re/Max’s $100 million buyback announced from 2022 that is still in progress.

Untimely selloffs

To assuage investor and employee fears, company executives will typically buy more shares as a show of good faith. Douglas Elliman CEO Michael Liebowitz bought $1.8 million in company stock upon his elevation to replace CEO Howard Lorber after his abrupt exit in a tumultuous period.

But Poleg, the CEO and founder, has been trending in the opposite direction. Since March 21, Poleg has sold over 735,000 shares for almost $3.3 million. The selloff has not been part of a 10b5-1 program, which allows executives to pre-plan sales to avoid accusations of trading on insider information.

Almost 85 percent of Poleg’s $4 million salary comes in the form of company shares, and he pointed out that given the stock’s downward trajectory, his 10b5-1 plan, which triggers sales at a minimum share price, has not been hit.

“I own more stocks today compared to where I was when we took the company public,” he said.

Poleg has not been the only seller. In May, the company’s largest investor Insight Partners sold 3.7 million shares, accounting for almost 2 percent of the company’s total shares outstanding and 10 percent of Insight’s holdings in Real Brokerage.

Insight Partners had entered into a 10b5-1 plan — only the plan was set up to sell off in mid-July. The May sale triggered an “early warning report,” which occurs when a company sells before its original 10b5-1 date.

Insight Partners did not return a request for comment.

Beyond the lawsuit

Ressler’s lawsuit also raises questions about the company’s financial conduct.

Ressler alleges that in June 2024, she issued a report to Poleg that Real Brokerage had issues with compliance, accounting and finance for its newly-launched products. She wrote that her report said the company was exposed to the risk of duplicate payments, accounting inaccuracies, and tax compliance and regulatory exposure.”

According to Ressler, she entered maternity leave in August “seriously concerned about the Company’s future, including compliance and legal exposure stemming from CEO Poleg’s decisions to prematurely launch products that, put simply, did not work.”

Ressler wrote that “at least some of these issues were addressed” during her leave, but added that upon her return in January, the company “continued to ignore her risk reports about the Company’s increasingly problematic actions.”

As an example of a failed product, Ressler pointed to the company’s Real Wallet offering, a banking and lending product that allows agents to withdraw money from their accounts before their commissions clear. The Real Deal has previously reported on the difficulties companies and agents have faced in trying to navigate commission advances.

Ressler alleged that the company knew the product did not work, claiming that it did not comply with underlying legal agreements, had no back-office compliance or financial infrastructure and was nonfunctional in Canada.

After the product launched, she claimed it had issues like duplicate commission and loan disbursements, an inability to recollect funds, and blackout periods that prevented commission payments from processing.

Ressler also claimed that agents who withdrew funds from the product did not repay over 20 percent of the time. She claimed that despite the issues, Poleg expanded the program by soliciting funds from agents and issuing loans against them, partially driven by the company’s falling stock price and struggling business model.

Poleg said the delinquent balance is “immaterial” to the company’s financial position, and declined to comment further on the lawsuit.

“Ms. Ressler’s employment with the Company was terminated based on the Company’s opinion that she engaged in actions that violated Company policies,” the firm said in a statement.

The stock is down over 5 percent since Ressler’s lawsuit.