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In the modern era, no one bats an eyelash when drivers pop open their trunk while still several feet away from their ride. Nor is it particularly remarkable when people use their mobile devices to start their engines and heat up their vehicles for a few minutes during a particularly cold winter night. It begs the question, why not apply this same convenience to the home?
SmartRent steps up to answer the call with its initial public offering (IPO). An enterprise-level smart home automation firm, SmartRent provides its clients with the operational efficiencies and security needs residents nowadays demand.
When is the SmartRent IPO Date?
On April 22, 2021, SmartRent’s management team disclosed that it had agreed to merge with Fifth Wall Acquisition Corp. (NASDAQ: FWAA), a special purpose acquisition company (SPAC). Also known as blank-check firms or shell companies, SPACs have no underlying business of their own. Instead, they initiate their IPO for the purpose of identifying a private enterprise and combining with that entity.
In SmartRent’s case, the merger deal had a lofty price tag of $2.2 billion. Earlier this year, according to a report from The Wall Street Journal, Fifth Wall Acquisition raised about $345 million in its public market debut. Not only that, following the merger-target announcement, the private investment in public equity (PIPE) round became oversubscribed, raising a total of $155 million.
Some of the largest apartment complex owners and real estate property developers in the U.S. — many of them clients of SmartRent — have agreed to the above multimillion-dollar commitment, including well-recognized names like Blackstone (NYSE: BX), privately held Starwood Capital Group, Lennar (NYSE: LEN) and Invitation Homes (NYSE: INVH).
Additionally, shares of the Fifth Wall SPAC moved higher following the announcement, with momentum carrying FWAA steadily northward into the summer months. Since FWAA’s first closing session up to its final day as a “SPAC stock,” the equity unit gained 9%.
On Aug. 23, a special meeting of Fifth Wall Acquisition shareholders resulted in an approval of the merger with SmartRent. From Aug. 25, shares of the smart building automation firm will trade on the New York Stock Exchange under the ticker symbol SMRT.
Notably, WSJ contributor Peter Grant stated this business combination “would be one of the largest such deals so far involving a proptech firm and a special-purpose acquisition company.” While SPACs have had a spotty record over the trailing year, many onlookers hope that SMRT stock can help send the underlying investment vehicle’s trajectory toward a decidedly positive direction.
SmartRent Financial History
One of the remarkable aspects of the COVID-19 pandemic and the resultant economic recession was that for SmartRent, the core demographic that the home automation firm’s clients serve — basically, middle-class white-collar workers — generally escaped the crisis unscathed. Not only that, through unprecedented governmental support like stimulus checks and extended unemployment benefits, many individuals are in a better position than they were prior to the crisis.
From near the beginning of the pandemic until June 2021, the personal saving rate stood atop double-digit territory. Even as recently as March of this year, the saving rate was extremely elevated compared to prior norms at nearly 27%. Combine this circumstance with the fact that millions of people participated in work-from-home initiatives and you have a backdrop where gainfully employed workers in popular metropolitan areas can afford elevated residential rental prices, thus potentially bolstering SmartRent’s revenue channels.
Further, SmartRent’s stacked library of product and service offerings, ranging from remote access and security functionality (including identity checks of guests, contractors and prospective clients) to monitoring and policy enforcement infrastructures are powerfully relevant to modern consumers. As well, integrated solutions such as self-guided tours enable would-be residents to assess a housing unit in a minimal contact environment — perfect for present public health concerns. Additionally, such tours enable residential complex managers to serve customers despite limited staff resources.
Although SPAC investors have plenty to like about SMRT stock, profitability will be a concern. For Q1 2021, SmartRent disclosed that it suffered a net loss of $9.3 million, which expanded from the $7.3 million loss incurred in Q1 2020. Further, you should not ignore uncertainties about the economy moving forward, particularly regarding the affordability crisis.
Nevertheless, it’s also important to factor in Q1 2021 revenue of $19.2 million, which grew nearly 16% year-over-year. As well, SmartRent deployed 32,483 of its system hubs in residential units, an increase of 81% YOY. With these product growth metrics, it’s not surprising that residential property giants have committed to the success of SMRT stock.
While not presenting the greatest financial profile, SmartRent backers are not paying so much attention to what is but rather what could be. Here, the potential for SMRT stock is simply massive.
According to data compiled by Statisa.com, the U.S. smart home market segment’s revenue tally by the end of this year could reach nearly $28.9 billion. By 2025, this figure could jump to almost $46.8 billion, or a 12.8% compound annual growth rate between the 2 periods.
Most significantly, though, the household penetration rate for smart home services — an essential component of the Internet of Things — will likely be 41% by the end of 2021. But experts predict that this metric will jump to 57.3% 4 years later, which will clear a vital threshold for Smart Home. Basically, a majority of high-earning individuals will expect smart technology solutions — and residential complexes going without such conveniences will be at a competitive disadvantage.
If that wasn’t enough to excite your senses, data from Fortune Business Insights states that the global smart home market size could reach $622.6 billion by 2026. Driven by green building policies in diverse countries like South Korea, China, Canada, India, Brazil and Germany, smart infrastructure integration aligns with broader trends toward metropolitan efficiencies.
How to Buy SmartRent IPO (SMRT) Stock
In your typical bread-and-butter IPO, financial underwriters purchase shares of the company seeking to go public for the purpose of distribution to their choicest clients. Known as a primary market transaction, this process is the first time that the “public” can purchase shares of the previously private entity. However, underwriters almost always sell these new issues to institutional clients.
Therefore, in most cases, retail investors must buy standard IPO shares at the open in a secondary market transaction. The beauty of SPACs, though, is that anybody can acquire shares of shell companies at any stage, from pre-merger announcement to shareholder approval of the business combination.
Additionally, acquiring SPAC shares is just like any security. If you already know how to buy stocks, you can start wagering right away. If not, just follow the easy sequences below.
Step 1: Pick a brokerage.
Thanks to the abundance of brokerages feeding intense personal investor demand, brokerages these days offer almost-identical financial incentives like commission-free trading. Further, since SPACs are readily available assets, you should narrow your choice of best brokers down to what ideally suits your lifestyle needs.
Step 2: Decide how many shares you want.
All new issues include the risk of the unknown. Therefore, choose a balanced share count that will generate solid profits if your gamble pans out but won’t devastate you if it doesn’t.
Step 3: Choose your order type.
Before wagering, familiarize yourself with these market concepts.
- Bid: The highest price a buyer is willing to offer, the bid is always lower than the ask.
- Ask: The lowest price a seller is willing to take, the ask is always higher than the bid.
- Spread: Primarily the difference between the bid and ask, the spread also signifies market liquidity and risk. Narrower spreads indicate higher liquidity and lower risk, while wider spreads imply lower liquidity and higher risk.
- Limit order: To buy (or sell) stocks at a specific price, choose limit orders, which provide transparency but no execution guarantees.
- Market order: In contrast, market orders guarantee fulfillment but only at the prevailing rate, which may change substantially during order processing.
- Stop-loss order: A protective mechanism for your account, a stop-loss order automatically exits your position at either a predetermined price or anything lower.
- Stop-limit order: Stop-limit orders only execute at a stipulated price, offering full control in your automated exits. However, such orders carry the same non-fulfillment risk as limit orders.
Step 4: Execute your trade.
To execute a market order, follow these steps:
- Select your action type (buy or sell).
- Enter the shares you want to acquire (or sell).
- Hit the Buy (or Sell) button.
Follow the same sequence for limit orders (but include your execution price).
SMRT Restrictions for Retail Investors
While exciting, investors should check their legal ability of participating in an IPO through reviewing the Financial Industry Regulatory Authority (FINRA) rules on restricted persons. Securities laws penalize advantaging privileged information.
For serious speculators of new securities, you should consider opening an account with services like ClickIPO, which buy pre-IPO shares (or shares at their initial offering price) of select entities for the ultimate intent of distribution to interested public investors.
SmartRent is a Matter of Competitive Necessity
As with any SPAC-based IPO, SmartRent features risks, mainly dealing with economic uncertainty and the viability of extremely elevated housing prices. Still, the conveniences and security of smart home solutions means that residential complexes that don’t offer them will be competitively disadvantaged. Therefore, SMRT stock is simply a matter of necessity.
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