The Latch IPO is the latest to jump on the SPAC bandwagon. Providing smart locks and software to buildings, Latch is looking to modernize real estate. And that has investors looking for Latch stock as a potential opportunity. (Also, for more IPO investing opportunities, check out our IPO calendar for upcoming listings).
But is Latch a good investment opportunity? Here’s what we know…
Latch IPO: The Business
CEO Luke Shoenfelder founded Latch Inc. in 2014. It’s a software-as-a-service (SaaS) provider in real estate. Latch provides both its smart locks and building-management software, LatchOS. The company aims to modernize today’s buildings and real estate experience. On Latch’s website, the company states:
Leveraging our knowledge from companies like Apple, BCG, and IDEO, we’ve rethought how people interact with space. Latch delivers a full-building operating system designed to help owners, residents, and third parties like guests, couriers, and service providers seamlessly experience the modern building. We’ve done this by combining software, devices, and services into a holistic platform that make spaces more efficient, enjoyable, and profitable.
In 2019, its products were used across 35 states in over 300,000 units. And one in ten new apartments in the U.S. were built with Latch products. As the first multifamily operating system for buildings, investors are interested in the Latch IPO. It could be an opportunity to reimagine modern-day buildings.
The Product: Will There be Growth?
Like any offering, Latch stock can be successful if the company has the right products. In the Latch IPO announcement, the company highlights what its LatchOS software has to offer.
Smart Access. The platform includes the Latch M, C and R Series of digital entry devices. They work for building entrances, common areas, garages, elevators and individual apartments.
Delivery and Guest Management. This enables contactless deliveries, package management and guest reception through the platform’s Intercom and Delivery Assistant.
Smart Home and Sensors. LatchOS smart home and sensor control works with any Latch partners such as Google Nest, ecobee, Honeywell and Jasco.
Connectivity. Cellular devices can connect through Latch Intercom and Hub, bringing internet access to new and existing infrastructure.
Resident Experience. Latch’s platform provides resident experiences and management capabilities such as resident onboarding. The average Latch app user interacts with it 4.6x a day.
Additionally, Latch plans to grow not only its business but its product offerings. The company lists these key growth drivers:
- Opportunities to sell into new and existing customer portfolios
- Expansion into a $54 billion total addressable market with new project construction and retrofit opportunities
- New offerings like Intercom, Smart Home and more, all accessible through LatchOS
- Further opportunity for more SaaS/internet businesses on top of LatchOS
Lastly, Latch claims it has strong financial results to date. This includes $167 million in booked revenue for 2020, representing a 49% growth from 2019. Latch also boasts 100% gross revenue retention and strong lifetime value compared to acquisition costs.
Speyer says 2020 was a strong year. Quarantines encouraged homeowners to look into tools and home projects. For more information, you can look at Latch’s investor presentation.
Latch was last valued at $454 million in 2019. But the company chose not to follow the traditional IPO process. Instead, the Latch IPO is coming via SPAC.
Latch Stock: SPAC IPO
SPAC IPOs are a popular trend. In 2020 alone, SPACs raised a record $82.1 billion. That’s more than six times the year before. And currently, almost 300 SPACs are looking for a deal. Because SPACs have no business operations, they can list quickly and easily on the market. The money raised from a SPAC’s offering is held in a trust for two years until the company finds an acquiree. In this case, Latch is the acquiree and TS Innovation Acquisitions Corp. (TSIA) (Nasdaq: TSIAU) is the SPAC.
TSIA is a SPAC launched by real estate owner, developer, operator and investing manager Tishman Speyer Properties, L.P. The global firm has a portfolio of 80 million square feet of first-class real estate across commercial, residential and mixed use. By accessing this portfolio, Latch can further its product expansion.
Rob Speyer, President and CEO of Tishman Speyer and CEO and Chairman of TSIA, said about the transaction:
As a long-time real estate and capital markets investor, Tishman Speyer has helped accelerate many of the prop tech innovations reshaping our cities. We launched our SPAC knowing that our expertise and portfolio could power the next generation of innovators on the public stage. Our mission has been to partner with a growing company; one with a great team, a strong and differentiated business model and the ability to scale quickly through our platform. As both a customer and early investor in Latch, I know Luke and his talented team check all of these boxes. We look forward to serving as an incubator, operational partner and launch customer as Latch develops and expands its exceptional product lines.
Latch looked at 10 different deals before moving forward with TSIA. Speyer stated:
Latch has successfully created an entire ecosystem around our full building operating system, devices, and partners that enhances the building experience for both owners and residents. This transaction provides the capital for Latch to accelerate our product and market expansion and drive bookings growth. Furthermore, Latch will be able to harness Tishman Speyer’s global real estate platform to more rapidly create new products, leveraging their vertically integrated real estate business and on-the-ground teams across the globe. We are fortunate to benefit from Rob’s vision and leadership and look forward to partnering with the entire Tishman Speyer team as we create value for our shareholders, customers, and residents by scaling our business in this next phase while we continue to enhance the way people interact with their spaces.
So, for those interested, let’s look at the Latch IPO details and when investors can expect Latch stock.
Latch IPO Details
The deal values Latch at $1.56 billion. Once the merger is completed, Latch expects to have $510 million in cash after fees and expenses. This includes $300 million from TSIA’s offering trust and $60 million in cash from Latch’s balance sheet. Additionally, there is a $190 million PIPE at $10 a share. Key investors include BlackRosk, D1 Capital Partners, Fidelity Management & Research Company and Chamath Palihapitiya. Latch’s current equity holders plan to roll over 100% into the new company.
Latch will trade on the Nasdaq under the ticker symbol LTCH.
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Although the Latch IPO date is unknown, the company says Latch stock is expected in the second quarter of 2021.