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The BFD

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Thank you

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Yes, I’m on vacation. No, I didn’t open the laptop to write about Carlyle’s CEO tumult or SoftBank’s losses or big acquisitions by Whirlpool and UPS. Instead...

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

Axios Pro Rata

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Venture Capital Deals

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Final Numbers: CFIUS reviews

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Plus, Thoma Bravo's next big tech buyout.

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🚨 Save the date: Oct. 26. New York City. The Axios BFD.

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Today in Twitter

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🏖️ I'm off for the next two weeks (yes, again). Pro Rata will be dark until Aug. 15, with Kia writing it that week.

I'll mostly be on Martha's Vineyard, masquerading as one of the beautiful people. Might host a reader BBQ while there, so drop a note if you'll also be on the island.

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Crypto venture capital activity has slowed amid price plunges and near-daily hacks. But one of the market's most active players is pledging to "invest even more aggressively."

Driving the news: Crypto exchange Binance tells Axios that it has named co-founder Yi He as head of Binance Labs, its VC and incubator arm.

This comes two months after the departure of former Binance Labs chief Bill Qian, which followed the resignation of executive director Nicole Zhang.

Binance Labs is a corporate group, but recently raised a $500 million fund that included outside investors like DST Global Partners and Breyer Capital. It also claims to have a whopping $7.5 billion of total assets under management, with a 21x multiple on invested capital, as of calculations made on July 22.

What she's saying: He, who becomes one of crypto's most powerful woman investors, tells me via email: "Binance Labs will invest even more aggressively. We are prioritizing projects with core technological competitiveness. We believe that in the future, blockchain technology will serve the greater mass just like the Internet does today. Infrastructure building is still the bottleneck, however."

He adds that Binance Labs is agnostic on whether the investment is structured as equity or tokens, and that the group also will focus on service projects like security and data.

What she's not saying: What role Binance Labs or its parent company might play in the new sale process for Forbes, after the media company's Binance-backed SPAC merger collapsed.

It's also worth noting that Binance committed $500 million to Elon Musk's troubled Twitter takeover.

Elsewhere: Paradigm, the massive crypto VC firm formed by Coinbase co-founder Fred Ehrsam and ex-Sequoia partner Matt Huang, recently told LPs that "our optimism remains unchanged by recent events," adding that past crypto crises have helped the industry "emerge smarter and more resilient."

The bottom line: Crypto venture capitalists don't really have the luxury of shying away from the asset class, as many retail investors have done, and that goes double for a corporate arm like Binance Labs.

But they could take a bit of a pause to lick their burn wounds. Instead, they're raising toward the fire, believing in what could rise from the ashes.

Binance Labs puts Yi He in charge

The crypto VC group also reports having $7.5 billion in assets under management.

Cryptocurrencies

Crypto venture capital activity has slowed amid price plunges and near-daily hacks. But one of the market&#x27;s most active players is pledging to &quot;invest even more aggressively.&quot;Driving the news: <a class="gtmContentClick" data-vars-link-text="Crypto exchange Binance" data-vars-click-url="https://www.axios.com/pro/fintech-deals/2022/06/01/binance-labs-500m" data-vars-content-id="2b49e3df-58b4-4011-b298-1ec69f33e5d7" data-vars-headline="Binance Labs puts Yi He in charge" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/pro/fintech-deals/2022/06/01/binance-labs-500m" target="_self">Crypto exchange Binance</a> tells Axios that it has named co-founder Yi He as head of Binance Labs, its VC and incubator arm.

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

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

Seamless, a fintech focused on underserved and unbanked users in Southeast Asia, agreed to go public at an implied $400 million valuation via a SPAC called INFINT Acquisition Corp. 

Why it matters: This reflects how the SPAC market, while battered, remains far more active than the traditional IPO market.

The bottom line: Seamless was one of seven new SPAC mergers announced this week, while two previously announced SPAC targets began trading. Meanwhile, only one company has raised more than $100 million via traditional U.S. IPO since the beginning of July.

SPACs remain hotter than IPOs

Seven new SPAC mergers were announced this week.

Fintech

Seamless, a fintech focused on underserved and unbanked users in Southeast Asia, agreed to go public at an implied $400 million valuation via a SPAC called INFINT Acquisition Corp. Why it matters: This reflects how the SPAC market, while battered, remains far more active than the traditional IPO market.

Axios Generate

Bridger Aerospace, a Montana-based provider of aerial firefighting and wildfire surveillance services, agreed to go public via a blank check company called Jack Creek Investment Corp. The deal would value Bridger at an implied $869 million.

Why it matters: More than 60 wildfires are burning across the U.S., as climate change has significantly increased wildfire risks. The National Interagency Fire Center reported Sunday that the active number could soon rise, while the U.N. recently said to expect a 30% jump in global wildfires by 2050. 

The bottom line: Bridger is a big player in aerial firefighting though they don't have the biggest planes for this task (others have DC-10, 737 tankers). Going public could help it beef up its fleet and maybe not be as beholden to government contracts every year.

Wildfire fighter Bridger Aerospace to go public via SPAC

More than 60 wildfires are currently burning across the U.S.

Wildfires

Bridger Aerospace, a Montana-based provider of aerial firefighting and wildfire surveillance services, agreed to go public via a blank check company called Jack Creek Investment Corp. The deal would value Bridger at an implied $869 million.Why it matters: More than 60 wildfires are burning across the U.S., as climate change has significantly increased wildfire risks. The National Interagency Fire Center reported Sunday that the active number could soon rise, while the U.N. recently said to expect a 30% jump in global wildfires by 2050.

Ominous forecasts about the impact of climate change serve as the backdrop for the world — led by U.S. lawmakers and companies — to debate big action on the problem, which could upend energy systems and our way of life.

Energy & Environment

Axios Media Trends

We still don't have Elon Musk's response to Twitter's lawsuit over his efforts to back out of his $44 billion acquisition, but we do now have Twitter's response to Musk's counterclaims. 

The big picture: Par for the course in this bizarre situation.

Backstory: Musk had filed the documents last Friday under seal, thus giving Twitter time to request redactions of what it considers to be confidential information. 

A judge ruled that Musk's documents must be unsealed by the end of Friday, although Twitter's new filing is a twofer in that it responds to many of Musk's claims. 

It's also worth noting that Twitter ultimately opted against redactions. 

What we've learned: Musk is leaning heavily on the idea that Twitter misrepresented key user metrics, including monetizable daily active users, which Twitter denies.

Musk, Twitter says, tries to claim he was "hoodwinked" (Twitter's language) by Twitter into signing the $44 billion merger agreement by asserting that Twitter breached its merger agreement by stonewalling information requests.

He also claims he has the right to walk away from the deal if Twitter was “miscounting” the number of false or spam accounts, per Twitter's response. Musk attacks Twitter’s process for the number of false or spam accounts based on his own calculations, which Twitter argues is unreliable.

The big picture: Twitter said Musk's response to its lawsuit includes "repeated mischaracterizations" of the merger agreement, specifically around the metrics Twitter provided. 

In an attempt to get out of the deal, Twitter said, Musk takes a swing at "alleged inaccuracies" in the company’s user metrics disclosures because he isn't able to identify "any false or misleading statement of fact in his disclosure."

Twitter says Musk "invents representations" that Twitter never made about its metrics "and then tries to wield, selectively, the extensive confidential data Twitter provided him to conjure a breach of those purported representations."

Go deeper: Timeline of Elon Musk and Twitter

Editor's note: This story has been updated with additional details throughout. 

Twitter slams Elon Musk's response to its lawsuit

As expected, Musk focused on user metrics.

Photo illustration of Elon Musk next to the twitter logo.

Photo illustration: Sarah Grillo/Axios. Photo: Dimitrios Kambouris/Getty Images for The Met Museum/Vogue

Twitter

Top Stories

We still don&#x27;t have Elon Musk&#x27;s response to Twitter&#x27;s lawsuit over his efforts to <a class="gtmContentClick" data-vars-link-text="back out of his $44 billion acquisition" data-vars-click-url="https://www.axios.com/2022/07/08/elon-musk-twitter-deal-terminating" data-vars-content-id="d4fd447d-364c-4059-b2b0-2b3f950d84c0" data-vars-headline="Twitter slams Elon Musk&#x27;s response to its lawsuit" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2022/07/08/elon-musk-twitter-deal-terminating" target="_self">back out of his $44 billion acquisition</a>, but we do now have <a class="gtmContentClick" data-vars-link-text="Twitter&#x27;s response" data-vars-click-url="https://s22.q4cdn.com/826641620/files/doc_news/2022/08/Twitters-Reply-to-Verified-Counterclaims.pdf" data-vars-content-id="d4fd447d-364c-4059-b2b0-2b3f950d84c0" data-vars-headline="Twitter slams Elon Musk&#x27;s response to its lawsuit" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://s22.q4cdn.com/826641620/files/doc_news/2022/08/Twitters-Reply-to-Verified-Counterclaims.pdf" target="_blank">Twitter&#x27;s response</a> to Musk&#x27;s counterclaims. The big picture: Par for the course in this bizarre situation.

Private equity investors were stunned last week when Sens. Joe Manchin and Chuck Schumer agreed to a giant reconciliation bill. Not only that Manchin got to yes on anything, but that he adopted very convoluted language on changing the tax treatment of carried interest.

The big picture: This could become a full employment act for private equity fund accountants.

What to know: We don't yet have full legislative text of Manchin's bill, with Senate Democrats instead only providing a one-page summary. But multiple sources say the carry change would be cribbed from the House version of Build Back Better (RIP).

This does not recharacterize carried interest as ordinary income, which everyone agrees would be the cleanest way to close the loophole (even among those who bristle at the suggestion that it is a loophole).

Instead it focuses on holding periods. First by expanding the minimum holding period for capital gains treatment on PE carried interest from three years to five years. Second, by starting the clock on the later of the date on which the fund acquired "substantially all" of its carried interest, or the date on which it acquired "substantially all" of its assets.

[Update: Senate Democrats have now released legislative language, and the carry provision does indeed mirror BBB.]

Here's the problem, as explained by law firm Gibson Dunn: "The Act does not specify how the 'substantially all' requirement is intended to be measured, and, because many investment funds (e.g., hedge funds and private equity funds) acquire assets at different times and have overlapping holding periods, it would be extraordinarily difficult for taxpayers to determine when these requirements have been satisfied."

Beyond that, the language also creates perverse incentives for PE investors by creating different minimum hold times for different portfolio companies within the same fund.

Word is that House Democrats were working to fix the BBB language until Manchin and Sen. Kyrsten Sinema torpedoed the entire package. But nothing was ever codified, which is why the new plan is the same as the old plan.

"Congress has got to provide more guidance on what it intends fund managers to pay," a private equity attorney tells me. "Otherwise you'll get a free-for-all because no one can really understand this."

Wildcard: It's still very possible that Sinema again refuses to play ball, or that she insists on dropping tax provisions like carry and corporate minimums. Axios' Alayna Treene last night reported more on her thinking.

The American Investment Council, a PE lobbying group, notes that there are nearly 150 private capital firms based in Arizona, plus 678 PE-backed portfolio companies that employ 229,000 Arizonans.

Savings: Senate Democrats claim that their carry tax changes could generate $14 billion over 10 years. Pretty impressive. Not the number, per se, but that anyone felt comfortable calculating a number given the legislative vagueness.

Also worth noting that $14 billon is the same figure used by CBO in 2019 for a proposal that would have treated carry as ordinary income. Pretty sure the short-term outlook for PE profits was a bit stronger in 2019 than in 2022...

The bottom line: The political debate over carried interest taxation began more than a decade ago. It's no less messy today than it was back then.

Democrats complicate the private equity tax loophole

This could become a full employment act for private equity fund accountants.

Private equity

Private equity investors were stunned last week when Sens. Joe Manchin and Chuck Schumer agreed to a giant reconciliation bill. Not only that Manchin got to yes on anything, but that he adopted very convoluted language on changing the tax treatment of carried interest.The big picture: This could become a full employment act for private equity fund accountants.

President Biden has made the COVID-19 crisis and a post-Trump return to national unity and traditional democratic ideals his top priorities. From vaccinations to stimulus to schools, Biden is seeking bipartisan compromise while showing a willingness to use executive authority and bare Democratic majorities in the U.S. House and Senate to implement his policies. Republican leaders are navigating deep party divisions over if and how to move beyond former President Trump.

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Stories

SPACs remain hotter than IPOs

Twitter slams Elon Musk's response to its lawsuit

Democrats complicate the private equity tax loophole

Wildfire fighter Bridger Aerospace to go public via SPAC

Binance Labs puts Yi He in charge

Newsletter editions

Axios Pro Rata: Breaking news

Axios Pro Rata: Carry on

Axios Pro Rata: Carry complications

Axios Pro Rata: Crypto VC optimism

Axios Pro Rata: BuzzFeed goes to court