Top of the Morning

Illustration of a fingerprint shaped to resemble a handgun

The BFD

Illustration of SoftBank chairman Masayoshi Son in front of money

Also...

Illustration of a bear claw holding a crypto coin.

Venture Capital Deals

Private Equity Deals

Public Offerings

Liquidity Events

More M&A

Fundraising

It's Personnel

Final Numbers: SoftBank snapshot

📣 Axios Pro keeps breaking deal news each morning, with its five newsletters focused on the climate, fintech, health tech, retail and media sectors. 

Sign up for your free trial at AxiosPro.com. Or, to request custom pricing for a corporate account of five seats or more, please go here.

✅ Thanks for reading Axios Pro Rata! Please ask your friends, colleagues and SoftBank portfolio company CEOs to sign up.

National

A green watering can with a dollar sign painted on it.

green

Dive into the world of dealmakers across VC, PE and M&A

Axios Pro Rata

Illustration of a puzzle in the shape of the twitter logo

Illustration of a piggybank wearing a Robin Hood hat.

SPAC Stuff

Final Numbers

✅ Thanks for reading Axios Pro Rata! Please ask your friends, colleagues and Twitter shareholders to sign up.

Photo illustration of Elon Musk shrugging and holding up his hands

Illustration of a female symbol, but its shadow has a slash through it.

✅ Thanks for reading Axios Pro Rata! Please ask your friends, colleagues and Jayson Tatum to sign up.

Illustration of a knife-like downward trend line slashing through a grid

🚨 Situational awareness: The Consumer Price Index rose 0.3% in April and was up 8.3% from a year earlier. That's hotter than economist estimates, but below March marks. Go deeper.

✅ Thanks for reading Axios Pro Rata! Please ask your friends, colleagues and valuation analysts to sign up.

Animated illustration of a plus sign formed by two one hundred dollar bills turning into an asterisk

Illustration of the Twitter logo growing hair like Donald Trump's, and turning orange.

✅ Thanks for reading Axios Pro Rata! Please ask your friends, colleagues and math teachers to sign up.

KKR agreed to sell C.H.I. Overhead Doors, an Arthur, Ill.-based garage door maker, to Nucor Corp. (NYDE: NUE) for $3 billion.

Why it matters: C.H.I. isn't just a massive payout for KKR, which calls it one of the firm's "largest returns in recent history," but it's also life-changing for more than 600 C.H.I. factory workers, distribution center workers and truck drivers.

C.H.I. was among the 25 or so KKR portfolio companies, mostly industrials, in which non-salaried workers received equity as part of the original buyout (or could buy in for a nominal amount, if they made more than $100k annually).

The average C.H.I. hourly worker or driver will receive $175,000 via this sale, with some earning more than $400,000. And there's even cash for recent hires, with those joining in 2022 getting around $20k and those joining last year receiving $40,000. 

Backstory: KKR had been planning to launch an auction for C.H.I., which it bought in 2015, but Nucor preempted the process. Nucor doesn't have an existing overhead door business, so C.H.I. management will remain and no layoffs are anticipated.

What they're saying: "This is a superior way to run a company ... not just stock ownership, but creating a real ownership culture," says Pete Stavros, KKR's co-head of Americas private equity, who notes that employee feedback had led to air conditioning in C.H.I.'s 1 million square foot factory and an on-site health clinic. 

"Last Wednesday we told employees what was happening, and got to tell them about what they'd earned. It was the most rewarding moment of my career," Stavros added.

Private equity's big payday for factory workers

C.H.I. isn't just a massive payout for KKR but it's also life-changing for C.H.I. workers.

A KKR logo on a phone. Photo: Igor Golovniov/SOPA Images/LightRocket via Getty Images

Private equity

KKR agreed to sell C.H.I. Overhead Doors, an Arthur, Ill.-based garage door maker, to Nucor Corp. (NYDE: NUE) for $3 billion.Why it matters: C.H.I. isn&#x27;t just a massive payout for KKR, which calls it one of the firm&#x27;s &quot;largest returns in recent history,&quot; but it&#x27;s also life-changing for more than 600 C.H.I. factory workers, distribution center workers and truck drivers.

After a record economic expansion, the coronavirus pandemic sent the U.S. economy into a recession as unemployment soared to staggering heights. The country now faces urgent questions about how much stimulus is needed for reeling consumers and businesses, and what a recovery might look like.

Economy & Business

Axios Media Trends

Former President Trump plans to partially restrict himself from using Twitter, according to a new federal securities filing from the blank check company taking his social network, Truth Social, public.

Why it matters: Trump previously said he wouldn't return to Twitter, even if reinstated by Elon Musk, but many believe it's a hollow promise. 

What the filing says: "President Trump is generally obligated to make any social media post on TruthSocial and may not make the same post on another social media site for 6 hours. Thereafter, he is free to post on any site to which he has access. Thus, TMTG has limited time to benefit from his posts and followers may not find it compelling to use TruthSocial to read his posts that quickly. 

In addition, he may make a post from a personal account related to political messaging, political fundraising or get-out-the-vote efforts on any social media site at any time."

Between the lines: This certainly seems to give Trump a massive out, given the caveat about "political messaging." But would restrict Trump tweets on purely social issues, business matters, etc.

What to know: Truth Social still isn't a sure bet to go public, as the blank check company appears to still be under federal securities investigation (per the filing).

The bottom line: This filing was written in a way to hedge in case Trump runs again for president. 

Trump partially restricts himself from using Twitter

This filing was written in a way to hedge in case Trump runs again for president.

Donald Trump

Politics & Policy

Craft Ventures last Friday met virtually with 165 portfolio companies executives to help them navigate the upside down environment for tech companies.

The big message: If your company needs to raise new funding within the next two years, conserving cash should trump growth.

For context: Craft also held a virtual call on February 1, warning that the environment was changing, but that one was attended by 60 fewer execs.

This is a sea change. Growth at almost any cost has been the private tech market's north star for nearly a decade.

Having 600 employees was better than having 500 employees, even if you couldn't quite explain how those extra 100 positions were accretive. Being a unicorn was better than not, even if it required so much funding as to be extra dilutive. Burn hot now and become profitable a few years after that massive IPO.

In short, size was sex. Now it can be an STD.

"If a company needs to raise, they need >2x growth to attract capital," argues Craft Ventures general partner Jeff Fluhr. "But it's even better if you don't have to raise for the next 24 months. So if growing 3x means you will have only 12 months of runway, but you can extend runway to 24+ months by only growing 2x YOY, I would strongly encourage the latter."

Craft believes a recession is more likely than not over the next two years, but this is more about prudence than prediction.

As another Silicon Valley investor said to me: Worst case scenario of slowing growth is that there's no recession and you end up a year behind schedule. Worst case of not slowing growth and there being a recession is that you're bankrupt.

Caveat: None of this really applies to companies flush with cash that have relatively slow burn rates; and those companies could end up being huge beneficiaries of the new math.

The bottom line: VC consensus is building that "wait and see" is no longer a reasonable posture.

The new math for tech startups

If your company needs to raise new funding within the next two years, conserving cash should trump growth.

An illustration where there are two more $100 bills than what initially appear

Craft Ventures last Friday met virtually with 165 portfolio companies executives to help them navigate the upside down environment for tech companies.The big message: If your company needs to raise new funding within the next two years, conserving cash should trump growth.

Before dawn on Friday the 13th, Elon Musk may have murdered his Twitter takeover.

Driving the news: The mercurial Musk at 5:44am ET tweeted: "Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users."

He also linked to a Reuters story about that spam estimate, which was from nearly two weeks ago.

At 7:50am, Musk added: "Still committed to acquisition."

If Musk really needs details supporting that calculation, then why not privately ask the management team with which he's barely had any contact? Or the board? And then, if the numbers don't check out, walk away. Maybe he'd even have been able to get out of his $1 billion breakup fee, arguing that Twitter misrepresented user metrics.

He also could have conducted due diligence before agreeing to buy the company, which sources say is something acquirers sometimes do.

Instead, this only intensifies speculation that Musk has buyer's remorse. Not only because he arguably overpaid, but also because of the amount of paper value he's lost on Tesla stock (and possibly crypto holdings) since the Twitter deal was first announced.

There's a reason Twitter was trading around $10 per share lower than Musk's purchase price, which is way wider than typical merger arbitrage. (FYI: Musk isn't limited under a standstill agreement, so theoretically could buy discounted Twitter shares on the open market, but the poison pill remains in effect).

What to know: Axios' Felix Salmon called this situation a "clown car" during a phone conversation yesterday, harkening back to an old Mark Zuckerberg comment, after Twitter CEO Parag Agrawal canned two senior product executives and announced a hiring freeze. Again, that was yesterday.

At the time, it felt like Agarwal was auditioning for Musk. Still does, but now he has much more credibility for the "I have a business to run and revenue targets to hit" line.

The bottom line: It's possible, perhaps even likely, that this is Musk's way of trying to renegotiate. But if so, it's creating a ton of short-term collateral damage. 

Not only to Twitter and Musk's reputations, but also to the psyches of thousands of employees whose financial futures are being put in unnecessary flux. Remember, lots of these people have options that accelerate if the deal closes. And others could be needing to find new jobs, right as the tech industry appears to be contracting.

Elon Musk's Twitter clown car

An illustration of Twitter's logo as a puzzle with a piece missing.

Elon Musk

Media

Before dawn on Friday the 13th, Elon Musk may have <a class="gtmContentClick" data-vars-link-text="murdered his Twitter takeover" data-vars-click-url="https://www.axios.com/2022/05/13/elon-musk-says-twitter-deal-temporarily-on-hold" data-vars-content-id="c3f09537-6272-4549-b11c-94c68c42a5f8" data-vars-headline="Elon Musk&#x27;s Twitter clown car" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2022/05/13/elon-musk-says-twitter-deal-temporarily-on-hold" target="_self">murdered his Twitter takeover</a>.Driving the news: The mercurial Musk at 5:44am ET <a class="gtmContentClick" data-vars-link-text="tweeted" data-vars-click-url="https://twitter.com/elonmusk/status/1525049369552048129" data-vars-content-id="c3f09537-6272-4549-b11c-94c68c42a5f8" data-vars-headline="Elon Musk&#x27;s Twitter clown car" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://twitter.com/elonmusk/status/1525049369552048129" target="_blank">tweeted</a>: &quot;Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.&quot;

From the Valley to D.C., Big Tech players like Facebook, Google and Amazon are under more scrutiny than ever as new technology develops and privacy and antitrust concerns grow in lockstep with companies’ ambitions.

Technology

Elon Musk tweeted Friday morning that his $44 billion deal to buy Twitter is "temporarily on hold" as he seeks more details on the platform's new estimate that spam and fake accounts make up less than 5% of users.

Why it matters: Musk provided few details, but the tweet from his official account will ignite havoc in the tech and financial worlds. Twitter shares extended their fall in pre-market trading.

"Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users," he said.

Musk later added in a separate tweet that he is "still committed to acquisition."

The company's shares plunged more than 17% in pre-market trading in response to the news. Tesla's shares rose about 5%.

The big picture: Musk's takeover bid has been wrought with so many twists and turns that Wall Street is beginning to feel skeptical that it will even happen.

For Musk to liquidate a significant amount of his Tesla stake and to wrangle bankers into giving him billions of dollars in financing, only to backtrack due to a single article, shows how manic the entire takeover process has been.

Most acquirers go through a thorough due diligence process to address these types of concerns before submitting a formal bid.

Be smart: The tweet comes a day after Twitter's CEO Parag Agrawal ousted two of the company’s top execs and paused hiring in an effort to be more fiscally responsible.

While sources say the changes were made outside of Musk's purview, there's no question that a looming takeover bid is adding pressure on the company to become more innovative and profitable.

On Friday, Agarwal acknowledged the move tweeting, “While I expect the deal to close, we need to be prepared for all scenarios and always do what’s right for Twitter. I’m accountable for leading and operating Twitter, and our job is to build a stronger Twitter every day.”

”Our industry is in a very challenging macro environment – right now. I won’t use the deal as an excuse to avoid making important decisions for the health of the company, nor will any leader at Twitter,” he added. 

Sources tell Axios that internally, employees are exasperated by the whole process.

The potential sale already caused a lot of concern about job security, and morale has been low. A pivot away from a sale would’ve been a relief, but the bait and switch is just as exhausting.

Our thought bubble: There's been speculation for weeks that Musk would walk away, and he just took a giant first step.

Editor's note: This article has been updated with additional comments from Musk.

Elon Musk says Twitter deal "temporarily on hold"

Musk provided few details, but the tweet from his official account will ignite havoc in the tech and financial worlds.

Photo: Dimitrios Kambouris/Getty Images for The Met Museum/Vogue

Elon Musk tweeted Friday morning that his <a class="gtmContentClick" data-vars-link-text="$44 billion deal to buy Twitter" data-vars-click-url="https://www.axios.com/2022/04/25/twitter-elon-musk-deal" data-vars-content-id="e0b546a4-0081-44db-9e48-d2646f7c6c24" data-vars-headline="Elon Musk says Twitter deal &quot;temporarily on hold&quot;" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2022/04/25/twitter-elon-musk-deal" target="_self">$44 billion deal to buy Twitter</a> is &quot;temporarily on hold&quot; as he seeks more details on the platform&#x27;s new estimate that spam and fake accounts make up less than 5% of users.Why it matters: Musk <a class="gtmContentClick" data-vars-link-text="provided few details" data-vars-click-url="https://twitter.com/elonmusk/status/1525049369552048129" data-vars-content-id="e0b546a4-0081-44db-9e48-d2646f7c6c24" data-vars-headline="Elon Musk says Twitter deal &quot;temporarily on hold&quot;" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://twitter.com/elonmusk/status/1525049369552048129" target="_blank">provided few details</a>, but the tweet from his official account will ignite havoc in the tech and financial worlds. Twitter shares extended their fall in pre-market trading.

Sections

Axios Local

Axios gets you smarter, faster with news & information that matters.

About

Subscribe

Dan Primack

Stories

Private equity's big payday for factory workers

The new math for tech startups

Trump partially restricts himself from using Twitter

Elon Musk's Twitter clown car

Elon Musk says Twitter deal "temporarily on hold"

Newsletter editions

Axios Pro Rata: As Twitter turns

Axios Pro Rata: New math

Axios Pro Rata: Elon's clown car

Axios Pro Rata: Smart firearm funding

Axios Pro Rata: Look out below