HomeToGo Begins Trading in Frankfurt After Its Merger With Lakestar SPAC I

On 22 September 2021, shares and warrants of HomeToGo SE began trading on the Frankfurt Stock Exchange under the ticker symbols HTG and HTGW. The vacation rental marketplace, headquartered in Berlin, had closed its merger with Lakestar SPAC I, a blank-check company already listed in Frankfurt, the day before. Deutsche Börse said in a press release that the opening price was €8.70.

HomeToGo said the business combination and a related private placement, known as a PIPE, would result in gross proceeds of approximately €250 million. When the deal was announced on 14 July 2021, the two companies said it valued the combined company at an equity value of €1.2 billion and an enterprise value of €861 million. The proceeds, HomeToGo said, were planned for growth, and especially for what it described as new and innovative solutions for its business partners.

How the deal was built

Lakestar SPAC I SE was a Luxembourg-incorporated shell set up to acquire a technology company. It had been listed on the Frankfurt Stock Exchange since February 2021 and was sponsored by Klaus Hommels, the founder and chairman of Lakestar Advisors. On 14 July 2021 it entered into a business combination agreement with HomeToGo GmbH: all the shares in HomeToGo would be contributed to the SPAC in exchange for new public shares, and the listed company would take HomeToGo's name.

The July announcement set out the money in its own terms:

• €275 million was held in Lakestar SPAC I's trust account, an amount the announcement said assumed no redemptions.
• Investors had committed €75 million through a PIPE at €10.00 per share. The announcement described them as including European family offices and tech entrepreneurs, with a significant investment by Hommels.
• HomeToGo's existing shareholders, convertible lenders and holders of virtual options were expected to keep 69% of the equity, Lakestar SPAC I's investors and founders 25%, and the PIPE investors 6%. Those figures also assumed no redemptions.

Redemption was the way out for the SPAC's investors: a holder could take cash back from the trust account in place of a stake in the merged company. The deadline for redemption notices was 6.00 p.m. on 9 September 2021. That evening the SPAC said the cash remaining after redemptions would be significantly higher than €175 million, the minimum the two companies had agreed on.

On 13 September 2021 the SPAC held an extraordinary general meeting. It said 100% of the shareholders attending voted for the merger, and it reported a redemption rate of 36.6%. The SPAC announced the completion of the merger on 21 September 2021, and trading under the new name began the next day on the exchange's Regulated Market, in the General Standard.

Why HomeToGo wanted the money

HomeToGo was founded in 2014. ShortTermRentalz described it in July 2021 as a vacation rental distribution channel and metasearch engine. Its marketplace gathered offers from other suppliers: the July announcement said more than 30,000 partners used the platform and that it combined more than 14 million accommodation offers in one place.

The case made to investors rested on growth through the pandemic. The July announcement gave gross booking value of €1.3 billion for 2020, which it called a record, and adjusted EBITDA of minus €2 million, a measure adjusted for share-based payment expenses. For the first half of 2021 it gave gross booking value of €904 million, up 27% on a year earlier, on preliminary figures. Deutsche Börse's release said the company employed more than 350 people and generated sales of €30 million in the first half of 2021.

ShortTermRentalz reported in July that the company had yet to make a profit and aimed to use the proceeds to help it reach profitability within two years. Fortune reported on the listing day that HomeToGo did not intend to pay dividends for the foreseeable future.

The company also pointed to a new use for rented homes that the July announcement called the workation: people renting a place for a few weeks or months to work remotely from a sunnier or rural location. Fortune quoted Patrick Andrae, the co-founder and chief executive, on the day of the listing: “Why should you stay in rainy and cold Germany over the winter, when you can spend a month in Portugal?”

Fortune wrote that a SPAC offered a candidate such as HomeToGo a faster process than a conventional initial public offering, with less uncertainty over funding because the two sides agreed on a fixed price.

What the investors did

The redemption figure was read in two ways. Lakestar SPAC I called 36.6% a very low rate compared with recent SPAC transactions in the United States, and said it left approximately €250 million of cash in the SPAC and the PIPE. Inga Schwarting, the SPAC's chief investment officer, said in the release of 13 September: “We have demonstrated conclusively that, with the right team and sponsor, Europe can do SPACs.”

Fortune counted what had gone. Citing Handelsblatt, it reported that about 37% of the SPAC's investors refused to buy into HomeToGo, which reduced the proceeds by about €100 million, to €250 million.

Deutsche Börse gave the opening price on 22 September as €8.70. The PIPE investors had committed in July at €10.00 per share. None of the documents and reports cited here gives a closing price for the first day.

Deutsche Börse called HomeToGo the first SPAC IPO on the Frankfurt Stock Exchange in 2021. Fortune reported, citing Deloitte, that Europe's SPAC market amounted to $3.9 billion in 2021 to that date, against $98.5 billion in the United States.

Others in the trade were on the same road. ShortTermRentalz noted in July 2021 that Sonder, a short-term lodging company, was to go public through a SPAC merger at a $2.2 billion valuation, and that Inspirato, a private travel club, was set to do so in a $1.1 billion merger with Thayer Ventures.

What it meant for hosts

Nothing in the releases cited here changed a term for a host or a property manager on the day of the listing. They announced no change to fees, commissions or contracts. What changed was the cash behind one of the channels a listing could travel through, and what the company said it would do with it.

• Listings reached HomeToGo through its partners. The company said its platform connected online travel agencies, property managers and other supply partners with travelers, so a home could appear there by way of the site or manager that listed it.
• The money was pointed at the supply side. The listing-day release said the proceeds were planned for growth initiatives, especially new solutions for business partners. The July announcement also named potential acquisitions. The releases gave no product names, prices or dates.
• The demand pitch was longer stays. A manager whose calendar and pricing allowed stays of a few weeks or months was selling what HomeToGo told investors was a new use for rented homes.
• The reach was international. The company said it operated localized websites and apps in 23 countries.

Andrae's statement on the listing day spoke to the supply side: “Serving our customers with the right product while ensuring the success of our business partners has and always will be at our core.” For a manager in September 2021, that was a promise to measure against the bookings the channel sent and the terms it asked for them.

Sources

1. HomeToGo SE (investor relations), HomeToGo SE: HomeToGo SE Begins Trading on the Frankfurt Stock Exchange (22 September 2021).
2. Deutsche Börse, HomeToGo SE: New entry in the General Standard of the Frankfurt Stock Exchange (22 September 2021).
3. Lakestar SPAC I SE (release on HomeToGo's investor relations site), Lakestar SPAC I SE : Lakestar SPAC I announces successful completion of the business combination with HomeToGo (21 September 2021).
4. Lakestar SPAC I SE (release on HomeToGo's investor relations site), Lakestar SPAC I SE : Lakestar SPAC I obtains shareholder approval and successfully concludes redemption period, paving the way for its business combination with HomeToGo (13 September 2021).
5. Lakestar SPAC I SE (ad hoc release on HomeToGo's investor relations site), Lakestar SPAC I SE : Status of the proposed business combination - Fulfillment of minimum cash condition under the business combination agreement (9 September 2021).
6. HomeToGo GmbH and Lakestar SPAC I SE (release on HomeToGo's investor relations site), HomeToGo GmbH and Lakestar SPAC I SE to Combine to Create a Publicly Listed Company as a Next Generation Marketplace Focusing on Alternative Accommodation (14 July 2021).
7. Fortune, Germany’s answer to AirBnB hopes to spark a SPAC boom in Europe (22 September 2021).
8. ShortTermRentalz, HomeToGo and Lakestar SPAC to combine in €1.2bn merger (16 July 2021).