1 SaaS IPO underneath the radar in 2021


Dozens of companies have already decided to merge with FACs (Special Purpose Acquisition Companies) in 2021. And it doesn’t look like the trend is slowing down. We recently learned that Real Estate Software-as-a-Service (SaaS) company Latch will go public through a merger with Tishman Speyer’s TS Innovation Acquisitions Corp. (NASDAQ: TSIA) In this Fool Live video clip recorded on February 8th, Matt Frankel, CFP, and Jason Moser, moderator at Focus.com, discuss Latch’s business and growth opportunities.

Jason Moser: First off, I’d like to talk about Latch, a software company that I believe will help keep the connected building safe, right?

Matt Frankel: Yes. They are a really interesting piece. They will be listed on the stock exchange through a SPAC merger. You show up with Tishman Speyer. It’s a pretty big real estate company that has a stake in Yankee Stadium, lots of New York real estate that’s really big. This is the most famous I’ve seen on their website. But you’ve worked on a lot of New York real estate. They started a SPAC, raised $ 300 million and just announced that they will be bringing Latch to the public.

Latch is a smart home technology company, this is how I would best describe it. They are known for their smart locks. When I went to CES a while ago I saw Latch Smart Lock which I got a demo of. This is where the name Latch comes from.

But their big product is the complete building operating system. Their mission is to bring rental housing into the 21st century. People can open their homes with their smartphones, they can check deliveries and visitors and things like that. There are all kinds of connectivity options that you can incorporate there. You do not buy your products as a homeowner. They are installed throughout the building. The building pays for a multi-year subscription to the Latch operating system, and residents and landlords can benefit from it. It’s a really interesting piece.

I know Chamath is mostly known for its own SPACs, the IPOs, IPOE [Social Capital Hedosophia Holdings V (NYSE:IPOE)], IPOD [Social Capital Hedosophia Holdings IV (NYSE:IPOD)], all these. But he actually led the private investment round for this company, the PIPE, as they call it, the private investment in public equity. That wasn’t that well known, but he’s heavily involved in it and actually tweeted that this is the best software-as-a-service company he’s ever seen, which is a bold statement.

Moser: Yes, it is.

Frankel: It’s a very early company. You are losing money faster than you are making income at this point in time. It is worth noting that they are at a very early stage. Therefore the rating is low. Latch will receive over $ 500 million as part of this deal, and even after that, they are valued at only $ 1.5 billion.

Moser: Wow.

Frankel: It’s not a strong rating. That capital should give them plenty of ammunition to grow and fuel their losses as we move on. But kind of interesting statistics. They had a turnover retention of 154%. That’s pretty good for a software-as-a-service company. That could be a lot he is talking about.

Moser: Usually you see 120%, 125%, 130% and think, “Wow, that’s awesome.”

Frankel: So 154% is pretty impressive.

Moser: Not bad.

Frankel: Every tenth new apartment building in the US built in 2019 was built with Latch with the operating system installed. There are 47 million rental units in the US and another 93 million in Europe. That’s a pretty large addressable market. This is one that I keep on my radar.

The SPAC is public. It’s called TS Innovation Acquisitions and is the company that is taking it public. The ticker symbol is TSIA. You can act on this now. Technically, the IPO will take place after the merger is complete. But just like SoFi, you can act it now. It trades at a pretty decent premium, but not like some of the other Chamath deals. It’s one that I keep on my radar. I’m not ready to pull the trigger yet. As we mentioned earlier, it takes me a long time to really get interested in an IPO, but this is definitely a fascinating one.

Moser: Yeah, it definitely sounds like it. It’s definitely a big market. We saw that Google made a huge investment ADT (NYSE: ADT), for example. Another company that I recommended Alarm.com (NASDAQ: ALRM) plays in a similar sandbox, so there are plenty of options there, especially as the 5G buildout rolls out and our infrastructure and connectivity continues to expand. There will be a number of different possibilities in the years to come, and it seems like Latch could play right into it.