Latch (LTCH) Financial Misreporting Settlement

S.D. New York

Court

1:22-cv-07473

Case number

07 Jun 2021

Class period Start

01 Aug 2023

Class period End

Latch reached a settlement with $LTCH investors over claims that it didn’t report certain hardware sales, leading to inaccurate revenue for 2021 and early 2022. These issues led to restating financial reports, causing a sharp decline in stock price and prompting legal action from shareholders.

Outline

Latch went public in June 2021 through a merger with TS Innovation Acquisitions Corp. Shortly after, problems emerged regarding how the company was recognizing revenue, particularly from its hardware sales. These financial discrepancies led to errors in Latch's reporting, which they were forced to correct. The restatement of financial results caused a 12% drop in stock value, spurring investors to file a lawsuit.

Timeline
June 3, 2021: This date marks Latch’s IPO through its merger with TS Innovation Acquisitions. Investors were optimistic due to the company's statements about its financial health and promising future. Following the IPO, Latch reassured investors of strong revenue performance and future growth.
August 25, 2022: Latch publicly admitted that it had made serious mistakes in its accounting, especially in how it reported revenue from hardware sales. The company announced that it would restate its financial reports for 2021 and early 2022 due to these errors.
August 26, 2022: As a result of this announcement, Latch’s stock dropped by 12.2%, closing at $0.95 per share.
August 2022: Investors filed a class action lawsuit, to demand compensation for misleading.
September 17, 2024: Latch agrees to settle with investors
Background

After going public, Latch faced significant issues with how it handled its revenue.

Specifically, Latch failed to report certain sales arrangements related to its hardware, which caused the company to improperly recognize revenue throughout 2021 and into the first quarter of 2022. These errors showed weaknesses in the company's internal financial controls, meaning that their processes were not strong enough to catch these mistakes early on.

In August 2022, the company admitted it would have to restate its financial results because the revenue it had previously reported was inaccurate. Latch disclosed that it had been improperly accounting for hardware sales and highlighted serious flaws in its financial reporting controls. The company also highlighted serious flaws in its financial reporting controls.  This caused the company's stock price to fall sharply, leading investors to realize that they had been misled about the company’s true financial health.

What can investors expect now?

Latch, has agreed to settle the lawsuit to resolve all claims related to misleading statements made about its financial reporting and revenue recognition practices. The parties will now work to finalize the terms of the settlement and submit it to the court for approval.

If you were damaged due to this situation, you can file for a payout and get your share of the settlement. You can check if you are eligible and other details in the FAQ section below.

Case Status

Tentative Settlement

Alleged Offence

Mismanagement,

Misleading Statements,

Financial Misrepresentation,

Failure to Disclose

Suspected Party

Directors,

Management

Security Type

Stocks

Trade Direction

Long

Filing date

31 August 2022

Plaintiffs

Slater Brennan

Attorneys

The Rosen Law Firm, P.A. (Jenkintown, PA)

Defendants

Garth Mitchell; Barry Schaeffer

Judge

William C. Bryson

Trades matching type

FIFO