Latch parts ways with CFO after difficult SPAC debut

As tech combos with blank-check companies sour, Latch’s move matters

Latch CFO Garth Mitchell is leaving the company less than a year after he assumed the role and led the company’s public market debut through a special purpose acquisition vehicle, or SPAC, an accidental e-mail obtained by TechCrunch shows. The executive shakeup is still not showcased on the news portion of Latch’s website, but the company did file with the SEC, as well as release the news via a wire service.

Latch said that, “effective immediately,” Mitchell will be succeeded by Barry Schaeffer, senior vice president of finance at Latch. The executive shakeup continues with COO Ali Hussain, who will maintain his title but step down as “executive officer and principal operating officer.” Junji Nakamura, a senior VP at the company, will also assume a new role as chief accounting officer.

“These changes are an important part of this next phase of our growth,” Luke Schoenfelder, Latch’s CEO and co-founder, said in a statement. “We look forward to continuing to deliver amazing experiences for our customers and increasing value for our shareholders through these changes.” Latch did not immediately respond to a request for comment.

From SPACs attack, to attacks of the SPACs

Latch’s changes come at a crucial moment for many tech companies in the public markets, after share prices fell amid a broader recovery from pandemic-induced valuation highs. TechCrunch has covered this trend since at least December of 2021. The selloff persisted into 2022, leading to a sentiment shift amongst investors regarding the value of technology companies.

Latch was not immune. The proptech company, which makes keyless entry systems that it sells to property managers, raised $152 million in known private capital before debuting on the stock market by merging with TS Innovation Acquisitions Corp. Its opening price, per Yahoo Finance, was $11 per share. It now trades at a little over $4 per share; representing a more than 60% decrease in value since its June, 2021 combination.

Other SPAC deals have posted similar declines. MetroMile is trading under $2 per share. Hippo is worth around $2 per share itself. Bird, the e-scooter company, is worth about $2.50 per share. Desktop metal is doing better at a little over $5 per share, meaning that it has not lost more than half of its value since its combination. BuzzFeed is trading in the same realm as Desktop Metal.

Unlatching

The executive shake up at Latch could be in response to its public-market struggles, and could mark an attempt to become a more investor-like business. It may not be alone: A number of companies in the proptech space pursued SPACs as the option gained popularity, meaning that we could see more companies execute similar shake ups in the coming weeks or months.

Companies that pursued SPACs, such as Latch, have been particularly scrutinized: per WSJ, nearly half of all startups with less than $10 million of annual revenue that went public last year through a special purpose acquisition company have failed or are expected to fail to meet the 2021 revenue or earnings targets they provided to investors.

Latch came somewhat close to its 2021 revenue targets as detailed in its original SPAC investor presentation. At that time the company said that it would generate net revenue of $49 million in calendar 2021, up from $18 million in 2020. Its Q4 2021 earnings detailed $41.4 million in total top line. (Latch also forecasted $75 million to $100 million in 2022 revenues at that time, far less than the $173 million that its SPAC presentation anticipated.)

It’s worth considering at this juncture who is at fault for such missed projections. The CFO is not singularly to blame, given that they are not the one setting company direction; the CEO is. That means that while Mitchell may be parting ways with the company, it doesn’t precisely mean that the blame for Latch’s revenue missing early estimates rests entirely on his shoulders. It’s also unclear if Mitchell left on his own terms, or if he was asked to depart from the company.

Mitchell spoke to TechCrunch’s Equity podcast last year about Latch’s decision to go public via SPAC as the broader investment community questioned its viability.

“The only thing to focus on is we are taking our company public, full stop, there are lots of distractions with the deal and the terms and warrants, but our team has been laser focused on preparing ourselves to operate as a public company…which is all encompassing,” Mitchell said. “We have not allowed a lot of the news to make us think something else is going on other than Latch’s preparing to become a public company.”

The company claims that Mitchell is leaving to pursue other opportunities.