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Smart-Lock Startup Latch Rides SPAC Frenzy To $1.5 Billion Valuation

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Smart-lock startup Latch began trading Monday through a SPAC listing that raised $453 million and values the company at over $1.5 billion. The shares, issued through a special purpose acquisition vehicle run by Tishman Speyer Properties, rose 4% on the first day of trading.

“Using the Tishman Speyer portfolio as an incubator for new ideas and new products…was really just too good to pass up,” says Latch’s cofounder and CEO, Luke Schoenfelder, who made the Forbes Under 30 list in 2018.

Latch, which had revenue of just $18 million last year, was founded in 2013 and is best known for its smart-locks, which can be unlocked with a smartphone. Schoenfelder and his cofounders stumbled on the concept after trying to solve a simpler problem: “How do you run out of orange juice in the morning and have a fresh carton delivered directly into your refrigerator at the end of the day?” Latch’s CFO Garth Mitchell told Forbes earlier this year.

The team realized that property access was the first hurdle to executing that concept, and soon homed in on the smart-lock market. They targeted residential properties at the outset, since the potential to scale was so much higher than commercial businesses.

Latch was valued at more than $400 million after its Series B round raised $126 million in 2019, when one-in-ten new multi-family projects across the U.S. utilized its technology. The company says it will use the new funding to expand into Europe and grow new business segments in the commercial space. A year ago, when offices shuttered and renters fled from major cities, things looked far more grim. “We had to make some tough choices in the spring to bring our burn down,” Mitchell says.

Now rental demand is rebounding in many urban areas and commercial landlords are eyeing the return of workers to offices, while new safety protocols have made contactless entry systems more appealing. Latch launched Visitor Express, a contactless system for offices, in early 2021. Overall it says its products have been purchased or reserved in over 300,000 units across the country, mainly residential. Revenue has risen from under $15 million in 2019 to $18 million last year, according to public filings, but losses have also swelled, from $50 million to $66 million.

The company followed many of its peers to market through a SPAC listing, which allows firms to skirt the scrutiny of a traditional initial public offering, including wading through some regulatory requirements and conducting roadshows that allow potential investors to question executives about opportunities and risks.

SPACs provide a faster way to market by taking a publicly traded shell company (the SPAC) and merging it with a target business like Latch. Investors in the shell company generally take large fees, creating a no-lose opportunity for many of their backers and a much riskier scenario for less sophisticated retail investors who are drawn to the hype.

Latch and its peers are now bellwethers for those risks, says Howard Schilit, author of Financial Shenanigans. Porch and Opendoor have already gone public through SPACs, while WeWork, Better, Sonder and Offerpad are planning listings to do so. And it’s not limited to real estate. PWC cited the “continued SPAC attack” as the driver behind 389 IPOs completed in the first quarter of the year that raised a total of $125 billion.

“There always have been successful SPACs, despite the fact that on average SPACs have never been a good investment for public shareholders,” says Michael Klausner, the Nancy and Charles Munger Professor of Business at Stanford Law School. He adds that “the SPAC bubble seems to be deflating. One never knows when a bubble will burst or fully deflate, but I think a reasonable inference from the market is that the deflation process is happening.”

Schoenfelder, for his part, insists that Latch would have gone public with or without a SPAC bubble, noting the multiple merger offers he fielded.

“If you look at the institutional investors that participated in our transaction…Fidelity, BlackRock, Wellington,” he says, “I think there would have been appetite in lots of different permutations.”

Source: Forbes – Smart-Lock Startup Latch Rides SPAC Frenzy To $1.5 Billion Valuation

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Source: https://spacfeed.com/smart-lock-startup-latch-rides-spac-frenzy-to-1-5-billion-valuation?utm_source=rss&utm_medium=rss&utm_campaign=smart-lock-startup-latch-rides-spac-frenzy-to-1-5-billion-valuation

Crowdfunding

SPACs: Singapore Exchange (SGX) Introduces Updated SPAC Listing Guidelines

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Singapore Exchange (SGX) recently revealed that they’ve created updated rules that will allow Special Purpose Acquisition Companies (SPACs) to list on its Mainboard “effective 3 September 2021.”

Tan Boon Gin, CEO of Singapore Exchange Regulation (SGX RegCo), noted that SGX’s SPAC framework should give firms an alternative capital fundraising option with more certainty on both price and execution.

Tan added that they want the SPAC process to “result in good target companies listed on SGX, providing investors with more choice and opportunities.” Tan also mentioned that “to achieve this, you can expect us to focus on the sponsors’ quality and track record.” Tan further noted that they have “introduced requirements that increase sponsors’ skin in the game and their alignment with shareholders’ interest.”

An SGX listing under the SPAC framework “must have” the following features:

  • Minimum market capitalisation “of S$150 million”
  • De-SPAC must take place “within 24 months of IPO with an extension of up to 12 months subject to fulfilment of prescribed conditions”
  • Moratorium on Sponsors’ shares from IPO to de-SPAC, “a 6-month moratorium after de-SPAC and for applicable resulting issuers, a further 6-month moratorium thereafter on 50% of shareholdings.”
  • Sponsors must subscribe to “at least 2.5% to 3.5% of the IPO shares/units/warrants depending on the market capitalisation of the SPAC”
  • De-SPAC can proceed “if more than 50% of independent directors approve the transaction and more than 50% of shareholders vote in support of the transaction”
  • Warrants issued to shareholders “will be detachable and maximum percentage dilution to shareholders arising from the conversion of warrants issued at IPO is capped at 50%”
  • All independent shareholders are “entitled to redemption rights”
  • Sponsor’s promote “limit of up to 20% of issued shares at IPO”

More than 80 respondents offered feedback, which is perhaps the highest response rate to an SGX consultation “in recent times,” the announcement revealed. It also noted that respondents included financial institutions, investment banks, private equity and venture capital funds, corporate finance firms, private investors, lawyers, auditors and stakeholder associations “whose views have been carefully considered in arriving at the framework.”

As confirmed in the announcement, SGX will continue to work cooperatively with the Securities Investors Association (Singapore) in order to “increase retail investors’ understanding of SPACs through collaborative efforts including the conduct of educational programs.”

SGX will “separately partner Singapore Institute of Directors to educate future directors of SPACs on the responsibilities and duties expected of them,” the update noted.

SGX’s responses to the feedback received and the updated rules may be accessed here.

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Source: https://www.crowdfundinsider.com/2021/09/179975-spacs-singapore-exchange-sgx-introduces-updated-spac-listing-guidelines/

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Automotive

Lucid Motors kicks off market debut with EV factory expansion plans

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Lucid Group (formerly Lucid Motors) will be expanding its factory in Casa Grande, Arizona, by 2.7 million square feet, CEO Pete Rawlinson said Monday just hours after the company officially went public with a $4.5 billion injection of capital.

The company also said it has 11,000 paid reservations for its flagship luxury electric sedan, the Lucid Air.

Part of the expansion will be used to accommodate the manufacturing of Project Gravity, the mysterious title given to the automaker’s forthcoming luxury electric SUV, a Lucid spokesman told TechCrunch. Not much is known about Gravity at this point, other than that it’s scheduled to be available from 2023 and that it will use the same battery platform as the Air. Patent drawings submitted to the European Union Intellectual Property Office, first noticed by a member of the Lucid Forum, reveal little more than the renderings on Lucid’s website.

The company is also planning on bringing more of the component production in-house, including major pieces such as the body panel stampings, the spokesman added. These parts were being handled by an external supplier.

The Casa Grande City Council approved the plans to expand the nearly 1 million-square-foot space in March. The first phase of the factory, which cost around $700 million to construct, went up in a record 12 months after breaking ground. Lucid has said that it wants to expand production capacity from around 30,000 vehicles per year to up to 400,000.

Lucid has had a long, sometimes tenuous road to the public market. The company first set its sights on bringing an electric sedan to production as early as 2018, but it quickly hit funding challenges that pushed this timeline further and further back. Lucid received major funding in 2018 with a $1 billion investment from Saudi Arabia’s sovereign wealth fund, which continued to be its largest shareholder throughout Lucid’s merger with special purpose acquisition company Churchill Capital IV Corp.

That merger hit a bit of a hiccup last week when the company failed to garner a sufficient number of votes on a key proposal — likely due to the rise of retail traders and malfunctioning spam filters, executives said in an investor call.

Lucid, which will now operate under the name Lucid Group, is listed under the ticker symbol LCID.

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Source: https://techcrunch.com/2021/07/26/lucid-motors-kicks-off-market-debut-with-ev-factory-expansion-plans/

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SPACS

ServiceMax promises accelerating growth as key to $1.4B SPAC deal

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ServiceMax, a company that builds software for the field-service industry, announced yesterday that it will go public via a special purpose acquisition company, or SPAC, in a deal valued at $1.4 billion. The transaction comes after ServiceMax was sold to GE for $915 million in 2016, before being spun out in late 2018. The company most recently raised $80 million from Salesforce Ventures, a key partner.

Broadly, ServiceMax’s business has a history of modest growth and cash consumption.

ServiceMax competes in the growing field-service industry primarily with ServiceNow, and interestingly enough given Salesforce Ventures’ recent investment, Salesforce Service Cloud. Other large enterprise vendors like Microsoft, SAP and Oracle also have similar products. The market looks at helping digitize traditional field service, but also touches on in-house service like IT and HR giving it a broader market in which to play.

GE originally bought the company as part of a growing industrial Internet of Things (IoT) strategy at the time, hoping to have a software service that could work hand in glove with the automated machine maintenance it was looking to implement. When that strategy failed to materialize, the company spun out ServiceMax and until now it remained part of Silver Lake Partners thanks to a deal that was finalized in 2019.

TechCrunch was curious why that was the case, so we dug into the company’s investor presentation for more hints about its financial performance. Broadly, ServiceMax’s business has a history of modest growth and cash consumption. It promises a big change to that storyline, though. Here’s how.

A look at the data

The company’s pitch to investors is that with new capital it can accelerate its growth rate and begin to generate free cash flow. To get there, the company will pursue organic (in-house) and inorganic (acquisition-based) growth. The company’s blank-check combination will provide what the company described as “$335 million of gross proceeds,” a hefty sum for the company compared to its most recent funding round.

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Source: https://techcrunch.com/2021/07/16/servicemax-promises-accelerating-growth-as-key-to-1-4b-spac-deal/

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Private Equity

Investors find European unicorns reluctant to join SPAC boom

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The U.S. SPAC market kept rolling along this week with news that Satellogic will go public on the Nasdaq stock exchange thanks to a merger with a blank check company. The Earth-imagery-focused company is standard SPAC fare, with strong capital needs and distant revenues. It was not alone in pursuing the transaction type Tuesday, with news breaking that Nextdoor will also go public on the Nasdaq via a SPAC.

Nextdoor’s projections, as TechCrunch noted, were more modest and thus more believable than what we’ve seen from many other SPAC-led debuts.

These companies represent the two poles of blank-check-powered public offerings: Some startups taking the SPAC route are more speculative, banking on revenues to come, while others feature more established companies with a history of material revenue growth. It’s easy to find more examples of both varieties. Acorns’ deal fits the established trend. Lidar SPACs? Less so.


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Given the breadth of companies pursuing blank-check deals, the SPAC boom isn’t over even if there has been chatter that the party is breaking up. Bessemer partner Mary D’Onofrio told The Exchange, for example, that while the “pace of SPAC IPOs” and combinations have slowed, “there is still $128 billion of SPAC dry powder in the market seeking acquisitions and incentivized to transact.”

Matt Murphy, a partner at Menlo Ventures, helped explain the SPAC pace deceleration that D’Onofrio discussed, telling The Exchange that the pace of SPAC deals “has slowed as they’ve gotten more scrutiny and don’t seem quite as ‘easy’ as they once were.”

But this week’s U.S. SPAC news tells us that blank-check companies are still finding a diverse set of companies to take public. But what about other regions? Unicorns are hardly unique to the U.S. startup ecosystem. Are we seeing similar SPAC interest in Europe?

The Exchange tried to find out, given that we’ve seen huge rounds from the region and a few IPOs over various types. Is the SPAC game afoot in Europe?

Hunting European targets

There’s a huge number of SPACs trading in the United States currently hunting for a deal. And there is historical precedent for U.S.-listed blank-check companies taking on European targets. Global law firm Skadden counts 16 U.S. SPAC-led transactions with European companies from 2015 through February of this year, for example.

“For the past few weeks, we’ve been approached on a recurring basis, much like all known French and European scaleups,” Aircall’s co-founder Jonathan Anguelov told French financial newspaper Les Échos last March (translation: TechCrunch). However, being approached doesn’t necessarily mean that European unicorns are entertaining the offers.

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Source: https://techcrunch.com/2021/07/07/investors-find-european-unicorns-reluctant-to-join-spac-boom/

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