What happened
Shares in home security company ADT(NYSE: ADT) were up more than 15% in the week as of trading on Thursday afternoon. The move comes after the company announced some major news on Tuesday:
- The largest home insurer in the U.S., State Farm, will make a $1.2 billion investment in equity in ADT, resulting in an almost 15% stake in the company.
- ADT will partner with State Farm to "expand opportunities" to offer smart, innovative home security technology to homeowners.
- State Farm will commit $300 million to fund innovation.
- Alphabet's Google (owner of a 6% stake in ADT) will commit a further $150 million (subject to milestones) to "advance opportunities created by this type of innovation," according to the press release.
So what
ADT has acquired some influential investors with deep pockets and substantive market positioning. For example, State Farm has 13.7 million homeowners policies, and combining them with ADT could result in lower insurance premiums. The idea is that homes using ADT security systems that use Google technology could reduce damage risk and improve security – and lower risk should mean lower premiums.
Now what
The potential to use smart, wireless-enabled technology to revolutionize home security is significant, and the latest developments will result in improved technologies that should increase adoption -- and customers should be able to reduce their premiums as a result.
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