Smart-Lock Maker Latch to Use Tishman Speyer SPAC to Go Public

Another day, another SPAC.
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Latch, a firm that makes smart locks and provides building management software, is going public in a SPAC deal with a real-estate giant, WSJ reports.

The Details: Latch will join with TS Innovation Acquisitions Corp., a SPAC from New York commercial real-estate firm Tishman Speyer Properties LP, which raised $300 million at the end of last year. The deal will value Latch at $1.56 billion and is expected to close in Q2.

It’s hard to overstate the popularity of the SPAC trend in 2020. The raised proceeds of SPACs, also known as blank-check companies, improved sixfold to $82.1 billion in 2020. “Nearly 300 SPACs are seeking deals, armed with about $90 billion in cash.”

More On The Deal: Latch, which was founded in 2014 as Latchable, plans to net roughly $450 million from the SPAC and other investors. Tishman Speyer, which owns Rockefeller Center and 200 Park Avenue in New York, is set to take around a 4% or $60 million stake in the company.

Numbers To Consider:

  • Latch has more than 200 employees and was last valued at $454 million as of 2019.
  • Its products are installed on less than 1% of the 47 million rental units in the U.S.
  • Net revenue was $18 million in 2020, a $3 million improvement from the year before. It lost $61 million before interest, taxes, depreciation and amortization last year.
  • Latch expects revenue to triple this year and to reach $877 million in 2025.

Looking Ahead: Latch is expected to list on the Nasdaq under the symbol “LTCH.”

Justin Oh:

Latch (soon to be $TSIA) looks to capitalize on the vast number of rental units and sells its smart locks, sensors, and delivery management technology to apartment building developers and owners. 

  • Targeting institutional apartment building owners is a very interesting B2B angle to attack an otherwise crowded smart-lock market (Ring, Nest, August, etc).
  • Latch is clearly very sticky and has never churned a customer.
  • The company claims super strong unit economics, acquiring customers at a 6.8x Customer Lifetime Value (LTV) to Customer Acquisition Cost (CAC). This means that for every $1.00 spent on acquiring a customer, Latch makes $6.80 back from fees.
  • Latch plans on growing in its core North American rental home market by:
    • Acquiring new customers
    • Expanding within customer portfolios
    • Adding new modules within buildings to increase recurring revenue
    • Capturing resident spending through the Latch app
    • Expanding into the European market
  • Being backed by real estate giant Tishman Speyer should solidify market reputation and visibility on growing within the Tishman Speyer portfolio.

$TSIA is trading at $17.00 per share, valuing the company at $ 2.1 billion.

  • The company expects to grow well over 100% over the next two years. An end of the pandemic and a recovery in urban rental markets should be a tailwind for the stock as well.
  • Today’s stock price values Latch at 12.4x 2022 estimated Revenue and 40x 2022 estimated Gross Profit. 
  • One one hand, this stock is very interesting and could be a great investment as they expand into a recovering rental market. On the other hand, it’s yet another SPAC deal that relies on cash flows 5+ years off into the future to justify its valuation. But this SPAC today looks more attractive than most.
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