Welcome to IPO This Week for the week of February 22nd. With limited activity on the traditional
IPO front, on this episode, we’re gonna talk some SPACs! First, I’ll give you the
latest on the most speculated SPAC merger of the year: Churchill Capital’s CCIV and
Lucid Motors… including me sharing a report of the potential day for a possible announcement.
And then I’ll cap this week’s episode by giving you a detailed look and analysis
of the recently announced merger between Gores’ GHVI SPAC and Matterport. If you like investing
in innovating companies, Matterport is definitely one you want to learn more about…so I hope
you stay tuned!
Welcome to the Healthy, Wealthy, and Wise channel and our weekly show where we talk
about the latest and greatest companies going public. As always, I want to thank everyone
in the community that comes back each and every week. And for those of you here for
the first time, my name is Kevin. And if you’re into staying on top of all of the companies
hitting the market, this channel might just be what you’re looking for, so definitely
considering subscribing and turning on the notification bell, that way, you won’t miss
any important information and videos I have for you as soon as they come out.
So this week, as I mentioned at the beginning of the video, we’re going to talk about
some SPACs today. And we’re doing that because as of this recording, I have no confirmed
traditional IPOs coming out this week. In fact, we only had one scheduled for last week,
which was a cannabis real estate company named AFC Gamma, and they ended up postponing their
IPO for now. I couldn’t find a particular reason for the delay, but it was a really
new company that still is in the process of qualifying as a REIT, so I’m wondering if
the delay was related to that. Anyway, I know a lot of you want to hear me
talk more about SPACs on the channel, so this might be that SPAC-tacular episode you’ve
been waiting for….was that bad? Did you roll your eyes? Alright, forgive me…don’t
click away, I’ll stop. So one of the SPACs I want to definitely talk
about today is the recently announced deal between Gores Holding VI and Matterport. And
for two reasons: one, being that it’s an interesting combination that has seen the
GHVI stock price more than double since the announcement of the agreement on February
8th, that was actually signed on February 7th. And two, because this was a request from
Skye in our community who made a very generous SuperChat donation in our last live stream
and I just wanted to send out a shout-out and a big thank you for stepping up to helping
to support the channel. Thanks Skye! But before we get into Gores and Matterport,
let’s take a look at the latest reports on Churchill’s CCIV SPAC and Lucid Motors,
which I said earlier, has to be the most widely anticipated potential merger of the year.
I almost hesitate to mention this as I’m recording it because it’ll probably change
before this gets released, that’s just been the nature of this possible merger. But the
latest over the weekend was reporting from Bloomberg that suggested that a deal for Lucid
could be announced on Tuesday, an announcement that would finally end the speculation that
has been going on for over a month. Now the article did qualify this reporting by stating
that the talks are still ongoing and could potentially fall apart. It just seems like
we’re getting at the point that this deal is gonna get finalized. On last week’s episode,
we talked about some of the background of the negotiations, in particular, a reported
Bloomberg terminal note suggesting that Churchill was still in talks with Venrock Associates
and a group of Lucid investors as of the previous week…it just seems that all parties are
trying to get the best deal they can get, which totally makes sense. My sense is that
with the Lucid Air looking to come out soon, I think Lucid Motors’ investors have some
leverage here and they’re using it…and I do wonder if the pressure is now more on
Churchill to bring this to a conclusion sooner than later. To that point, according to Bloomberg,
CCIV has been in talks to raise between $1 and $1.5 billion in funding from institutional
investors to support the transaction. The valuation and the amount of additional funding
could still change based on investor demand, but the combined company could be valued at
by as much as $15 billion, as stated by sources in the article. What do you guys think; is
this deal finally happening this week? Or do you think it’s at risk for falling through?
Let us know in the comments. Alright, let’s move on to the headliner
of this week’s episode and talk about Matterport, the company targeted by Gores Holding to go
public. We’ll go over its background and some financials. And then we’ll talk about
Gores and their performance and success rate in taking companies public by the SPAC route
before I share some personal thoughts and an assessment of valuation. Now just a quick
reminder as we get into this analysis, keep in mind this video should not be viewed as
me providing financial advice...you should always do your own research or consult with
your own financial advisor when making any investment decision.
So Matterport describes themselves as the leading spatial data company focused on digitizing
and indexing the built world. Have you been looking at real estate online recently and
clicked on a 3D tour? Not one of those cheap slideshow ones but a real 3D tour. If so,
you might not have noticed, but what you might’ve been seeing was an example of the company’s
offerings and capabilities. Matterport has been around since 2011 and holds claim to
an all-in-one 3D data platform that enables anyone to turn a space into an accurate and
immersive digital twin which can then be used to design, build, operate, promote, and understand
any space. And this can be done with a 3D camera, a lidar camera, or even simply with
an iPhone or iPad. This past year, like so many other tech companies…think ZOOM as
an example, Matterport’s technology was found to be vital to an entire industry during
the pandemic, this one being the massive real estate industry, where it allowed potential
home-buyers and renters to be able to tour a property completely virtually when it couldn’t
be done in person. Matterport's proprietary AI technology automatically
creates a dimensionally accurate, photo-realistic, three-dimensional digital twin of any building
that is loaded with spatial data. The AI understands what is important about a building or space
such as geometry, layout, structural analysis, and even includes furnishings and equipment.
Matterport's spatial data provides building insights and analysis so that customers have
a more efficient and scalable way to experience and manage buildings.
Matterpoint claims to have more than 10 billion square feet of space in its spatial data library
across millions of buildings in over 150 countries. The company monetizes its data primarily under
a recurring revenue Software as a Services model and grew its subscriber base by more
than 500% in 2020 to about 250,000 subscribers, up from 40,000 in 2019. According to the Chief
Financial Officer of Matterport, JD Fay, total revenue in 2020 was $85.9 million, up 87%
year-over-year. As far as the market opportunity, the company
and Savills World Research estimate a total addressable market of 240 billion dollars
for Matterport to operate within, which is only really now beginning to be addressed.
And for near term revenue forecasts, Matterport estimates 2021 revenue of 123 million dollars
and 2022 revenue of 202 million dollars. And then through 2025, revenue is expected to
reach 747 million dollars, which would be a compound annual growth rate of 59%.
Now with SPAC merger deals, it’s important to consider the performance of the SPAC sponsor
itself. We already mentioned Churchill earlier with CCIV who has well-known Michael Klein
behind them. And we’ve talked about the well-known Chamath Palihapitiya before on
the channel, another big name in this space. And then to this SPAC we're talking about
and the merger with Matterport, just so happens to another one of the more well-known and
established sponsors. This one, named Gores Holdings VI, is one
of seven vehicles sponsored by an affiliate of The Gores Group, a global investment firm
founded in 1987 by Alec Gores. To this point, Alec Gores and affiliates of The Gores Group
have completed five business combinations representing over $25 billion in transaction
value. As you can see on your screen, the last row looks at one year investor return
based on a buy in price of $10 and all have positive returns. The company with the highest
return was one of the first SPAC mergers I talked about on the channel, and that was
Gores merging with lidar company, Luminar. As far as the deal itself, upon closing, the
combined company will have an equity value of $2.9 billion and an enterprise value of
$2.3 billion. Currently, and prior to a finalization of the merger, you can invest in the SPAC
which trades under the ticker GHVI. After the companies formally merge, you would then
be able to invest in the company under the ticker MTTR. The expectation is that the transaction
will close in Quarter 2. As to some of my own personal thoughts on
this Gores Matterport deal, I think there’s a lot to like about it, and from what we’ve
seen so far from GHVI stock performance since the announcement, the market has had a positive
response to it...as of this recording, its trading in the mid 20 dollar range. While
companies going public with SPACs don’t have the scrutiny in their financials that
a traditional IPO goes through which always makes me hesitate some, I like that Matterport
already has a product on the market and can conceive of them having done well in a real-world
sense, whether it’s in current revenue growth or market opportunity. First of all, real
estate is considered to be the world's largest asset class when you consider commercial,
industrial, and residential properties together. And when you look at data showing that there
are more than four billion buildings worldwide, and that less than 1% are digitized, the opportunity
for future growth makes sense. Now obviously not every building will need to be digitized,
but I can absolutely see the value in industrial and commercial buildings being digitized…whether
it’s for mapping for customers, thinking about something like Google maps integration….or
looking at capital improvements where a company could save tons of money by not needing so
many people to travel and be onsite for assessment. And then for residential growth, that business
could continue to build over time as properties are put up for sale. Now a lot of people might
think the big boost for Matterport was because of the pandemic, but might believe that the
demand for it will go away as economies continue to open up. But I don’t think so. While
I think the pandemic moved the adoption of the technology faster, particularly for the
real estate industry, I think it’s just the next logical step in promoting houses.
You know, I still remember when people looked for houses in the newspaper or by picking
up a real estate book at the grocery stores. Yes, feel free to comment how old I am! And
those "resources" had very little details in them, so you really had to go see the property
in person if you really wanted to get an idea what it was like. Then with the internet obviously,
you started to have online listings that gave you more pictures and information to determine
if a property was something you were really interested in enough to go see in person,
so you weren’t wasting your time looking at properties that you ultimately wouldn’t
buy. Now with Matterport technology being used in online 3D tours, which I’ve personally
seen in online real estate ads, it just goes a step further into letting you determine
if a property is one you’re really interested in. Having tried these 3D tours myself, I
think they’re awesome. As the world continues to use technology to become more efficient
and convenient, just from the real estate perspective alone, the value in their product
seems clear to me. I mean real estate agents won’t need to waste time setting up and
going to appointments for buyers that, if those buyers had a digital view, may have
ruled that property out without ever seeing it, saving everybody the headache. And the
same for potential renters. And it could also give you an edge as an Airbnb host where you
could provide a view that is more likely to meet potential guests’ expectations, thereby
getting better reviews. And for buyers and renters, again just think about it…you have
the opportunity to get a much better idea of a property before you decide to head out
and potentially waste an afternoon traveling back and forth to look at something that,
had you had a better look at it online, you might have decided wasn’t worth your time.
So from a business model, personally seeing and using their product, and with its growth
prospects, I really think the company could be a good one to own.
Now as to valuation, obviously now that’s something you have to consider, at least I
do, particularly as the GHVI stock price has already jumped significantly on the announcement.
At first glance, by looking at the terms of the deal, you’ll see a price to sales measure
on 2020 revenue of around 33. However, using the current stock price in the mid twenties
and looking at a Price to Sales measure on 2020 revenue, you’re looking at a much pricier
current P/S ratio of 84. And then looking at future revenue, the Price to sales would
be around a 59 multiple for 2021 and around 35 for 2020. So you just need to figure out
the peer groups, look at growth rates and determine if it’s at a price point you’re
interested at. Now that’s easier said than done; because it can be difficult when you’re
dealing with an innovative company like Matterport with a unique product undergoing rapid growth
as you can’t always find an established, public company to compare it to for a true
apples to apples comparison. Now everyone that’s been with me for awhile
knows I’m not going to tell you if you should buy or pass, or what a price target is because
I don’t try to predict the future since I wasn’t born with that super-natural ability.
But my hope is that if you've taken in the information I’ve shared with you and considered
some of my opinions I have on them and most importantly, you do a little more research
and reasoning on your own, hopefully you’ll come up with the best decision for yourself.
So having said that, what are your initial thoughts on GHVI and Matterport? Is this an
investment you’ve made or are considering? Let us know.
Anyway, I hope you enjoyed the video and if you want to see more videos like this, please
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button. And with that, I’ll wish you a good week of trading….thank you for watching,
and until next time, have a great day!