UPDATED, Aug. 26, 2022, 3:30 p.m.: Smart-lock maker Latch said its financial statements for 2021 and the first quarter of 2022 are unreliable.
The Chelsea-based company, backed by Tishman Speyer, warned the SEC of “material errors and possible irregularities” in its financial reporting, Crain’s reported. The startup is conducting an internal investigation into the issue.
An SEC filing shows the company’s audit committee launched an investigation on Aug. 10. The issues and irregularities stemmed from how Latch “recognized revenue associated with the sale of hardware devices” during the year-plus period. The company said it plans to restate its financial statements for the affected quarters.
Latch’s internal investigation found “unreported sales arrangements” from sales activity “inconsistent with … internal controls and procedures,” according to the filing. The company noted that finding irregularities going further back in time is not beyond the realm of possibility.
Latch was founded in 2014, also specializing in building management software. Two years later, it raised $126 million through a Series B funding round, which had investors such as Tishman and Brookfield. The company was valued at $454 million at the time.
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Latch to go public via Tishman Speyer’s SPAC
Latch went public last year after merging with Tishman’s special-purpose acquisition company. The company had an expected valuation of $1.56 billion when the SPAC deal was reported last January.
The public company’s trading took a turn for the worse in recent months. Investors started aggressively selling after Latch shares dropped in value and a lockup period ended.
Latch has executed three rounds of layoffs this year alone, letting go of more than half its staff. The stock dropped to $1 on Friday.
The value of the stock could be the just the latest of Latch’s problems. After disclosing the financial irregularities to the SEC, the company received a notice warning that it was no longer in compliance with Nasdaq and could be delisted from the stock exchange.
Latch has until Oct. 10 to submit a plan to Nasdaq to regain compliance with its regulations, according to the notice.
Correction: Due to an error in the source article, a previous version of this article said Tishman reduced its number of shares by roughly 6 million from April to mid-June.
— Holden Walter-Warner