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How This SaaS Company Is Going to Use $490 Million in SPAC Proceeds

By Matthew Frankel, CFP® - Mar 17, 2021 at 6:51AM

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This SPAC merger is providing quite a bit of growth capital for a high-potential business.

Property technology and software-as-a-service (SaaS) company Latch is set to go public through a merger with blank-check company TS Innovation Acquisitions (TSIA). And like most SPAC mergers, the deal will provide Latch with tons of new capital -- nearly half a billion dollars in this case. In this Fool Live video clip, recorded on March 8, contributor Matt Frankel, CFP, asks Latch's CEO, Luke Schoenfelder, how the company plans to put that money to work. 

Matt Frankel: Another great point about being in a SPAC IPO is you can raise a lot more capital than you would in traditional IPOs, especially if you're in a more earlier-stage growth company.

Luke Schoenfelder: Yeah, totally.

Frankel: You're getting roughly half a billion dollars in the SPAC deal in capital, if I'm correct on that.

Schoenfelder: It's $300 million cash and trust and then $190 million in the PIPE. So $490 (million), but precision matters, you know?

Frankel: That's true. [laughs]

Schoenfelder: Yeah, yeah. [laughs]

Frankel: But that's a lot of money. The whole valuation, I think, it's less than $2 billion.

Schoenfelder: It is. On a fully diluted basis, it's about $1.56 billion, if I recall correctly.

Frankel: That's a lot of capital for a company of that size. What are you going to do with it?

Schoenfelder: I think, an important context, we've publicly raised, I believe, $150 million, is what's been disclosed. So we've had large amounts of capital that we've invested previously and we think we've invested it wisely, which is why folks are looking at this additional round of investment. But if you zoom out, I think a lot of people see us building products for apartments, and that's a big market and they're excited about it, like we are, which is great. But what we're really doing is we're productizing the apartment itself. I know that sounds maybe a little fluffy, but what software interface has existed for spaces before? Think about all of the things that happen in your space and the lack of software, and frankly, just efficiency, that exists there. We have a roadmap that allows us to continue to deliver innovation for a very long period of time, and people are very excited about backing our team to go and continue to deliver the products for this space. That's what we use the cash for, primarily.

Frankel: I would love to see your vision for what an apartment building in 2040 is going to look like because it sounds like you guys want to own that space in 20 years.

Schoenfelder: Yeah. I don't know. Are you an iPhone or an Android user? Which ecosystem are you in?

Frankel: I'm Android.

Schoenfelder: You're Android? OK. I'm not quite as familiar with the phone transition process when you switch phones, but in iOS land, there's now this blue cloud that comes up on the screen of your old phone and you just scan it with the camera on the new phone and that's how all the data moves over. You're just on your new phone. Why doesn't moving work that same way, where I'm just moving, all of the stuff about me stays the same? It's just this one thing, the address, that's changing. All of my preferences about the world are kind of similar. Why are we not able to move in that fluid way? I think those are the types of use cases that we're looking at and saying, we think you should be able to, again, subscribe to space and have your preferences go with you and have something that's really tailored to you.

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