Jul 2, 2020

Axios Pro Rata

By Dan Primack
Dan Primack

🎧 "Axios Re:Cap" spoke with economist Stephanie Kelton, a rising star in Democratic Party circles, about a burgeoning theory that federal budget deficits no longer matter.

Top of the Morning

Illustration: Sarah Grillo/Axios

The romance between private equity and Hong Kong may be over, before it even had a chance to begin.

State of play: Hong Kong officials in February announced plans to introduce a new carried interest tax scheme that is expected to be one of the world's most generous. This came on top of Hong Kong's existing effort to implement a limited partnership fund regime — all of which could make the city a more viable alternative to the Cayman Islands, particularly for Asia-focused funds.

  • This week, Beijing passed a new security law for Hong Kong that effectively eliminates many of the civil rights that local residents have long exercised. It also increases the likelihood that foreign nationals, including fund managers, could be arrested for vaguely defined offenses, and sent to mainland China to stand trial.
  • As Axios' Bryan Walsh wrote yesterday, the law "casts doubt on the future of the place that has long branded itself as 'Asia's World City.'"

What's next: We're still awaiting specifics of Hong Kong's new carried interest tax treatment. In the meantime, expect rival jurisdictions like Singapore, and maybe even Japan, to wine and dine private equity executives.

The bottom line: Private equity isn't a full-fledged avatar for global business, but it may become one of the first to loudly signal whether the new security rules overwhelm the city's financial benefits.

The BFD

Illustration: Aïda Amer/Axios

YRC Worldwide (YRCW), a Kansas-based commercial trucker, secured a $700 million loan from the U.S. Treasury Department, in exchange for a 29.6% equity stake.

  • Why it's the BFD: This is by far the largest stimulus loan for any non-airline company, and the first from a $17 billion allocation for companies deemed critical to national security. The loan is also controversial, given that YRC was struggling long before the pandemic.
  • The bottom line: "YRC is a large company with a tiny stock. It has 30,000 employees and 200,000 customers, but its market capitalization is less than $70 million as of Tuesday’s closing price." — Al Root, Barron's
Venture Capital Deals

Andruil, an Irvine, Calif.-based defense-tech startup, raised $200 million at a $1.9 billion valuation. Andreessen Horowitz led, and was joined by fellow return backers like Founders Fund. http://axios.link/Mh2A

🚑 Amylyx Pharma, a Cambridge, Mass.-based biotech focused on neurodegenerative, raised $30 million in Series B funding led by Morningside Ventures. http://axios.link/dyZu

CCSL, a London-based provider of carbon dioxide capture and separation tech, raised $22 million in Series B funding co-led by Equinor Ventures and ICOS Capital. http://axios.link/3J6z

Netwerk, an Indian B2B online marketplace for manufacturing items, raised $21 million in Series C funding. Greenoaks led, and was joined by return backers Accel, Kae Capital, Lightspeed Venture Partners, and Sequoia Capital. http://axios.link/Bs3y

🚑 Citryll, a Dutch developer of antibodies, raised €18.5 million. Seventure and BioGeneration co-led, and were joined by return backers BOM Brabant Ventures, BrightGene, and ModiQuest. www.citryll.com

🚑 BioDirection, a Boston-based developer of point-of-care diagnostic products for traumatic brain injury, raised $18 million in Series C funding led by Shepherd Kaplan Krochuk. http://axios.link/hcHS

Sundae, a San Francisco-based online marketplace for distressed residential properties, raised $16.6 million in Series A funding. QED Investors led, and was joined by Founders Fund and Susa Ventures. http://axios.link/OKmj

Pudu Technology, a Chinese developer of indoor delivery robots, raised $15 million in Series B funding from Meituan. http://axios.link/z5hw

Justo, a Mexico City-based delivery-only grocer, raised $12 million. Foundation Capital led, and was joined by Mountain Nazca, FEMSA Ventures, Quiet Capital, and 500 Startups. http://axios.link/L06j

Vodmod, a developer of in-game voice filters, raised $8 million led by Bitkraft Ventures. http://axios.link/5fAp

Layr, an Atlanta-based business insure-tech startup, raised $5 million in seed funding. Sandbox Insurtech Ventures led, and was joined by Flyover Capital, Maschmeyer Group Ventures, and Lloyd’s of London. http://axios.link/S2Ig

OurPeople, a British team communication platform for deskless workers, raised $2 million in Series A funding led by Alpine Medidian. http://axios.link/0vth

Private Equity Deals

Core Industrial Partners invested in Arizona Natural Resources, a provider of custom formulation and contract manufacturing solutions for personal care products. www.arizonanaturalresources.com

🍕 NPC International, the largest U.S. operator of Pizza Hut restaurants, filed for Chapter 11 bankruptcy protection. NPC was acquired in 2018 by Eldridge Industries. http://axios.link/rwPc

The Rise Fund acquired a portfolio of solar PV projects in China from Trina Solar. http://axios.link/1WHI

Public Offerings
Source: Giphy

Lemonade, a digital insurer for homeowners and renters, raised $319 million in its IPO. The company priced 11 million shares at $29 (above upwardly-revised range), for an initial market cap of $1.59 billion. It will list on the NYSE (LMND), and had raised around $480 million from firms like SoftBank (27.3% pre-IPO stake), Sequoia Capital Israel (10.3%), Aleph (10.3%), General Catalyst (7.3%), XL Innovate (5.2%), and Thrive Capital. http://axios.link/81MD

Accolade, a Seattle-based personalized health and benefits platform, raised $220 million in its IPO. The company priced 10 million shares at $22, versus initial plans to offer 8.75 million shares at $19-$21, for a fully diluted market value of $1.2 billion. It will list on the Nasdaq (ACCD), reports a $53 million net loss on $133 million in revenue for the fiscal year ending 2/28/20, and raised around $240 million in VC funding from firms like Accretive (26.9% pre-IPO stake), Andreessen Horowitz (16.2%), Carrick Capital (9.9%), and Comcast Ventures (6.9%). http://axios.link/WahG

Liquidity Events

🚑 TPG hired Goldman Sachs and William Blair to find a buyer for WellSky, an Overland Park, Kansas-based post-acute care software provider that could fetch around $3 billion, per PE Hub. http://axios.link/Acb1

More M&A

Jeju Air, a South Korean budget carrier, may walk away from an agreement to buy smaller peer Eastar Jet due to the pandemic-driven travel slump. http://axios.link/ccmA

Sears is considering a sale of its home improvement unit, which could fetch around $1 billion, per Reuters. http://axios.link/Q0Ds

🚑 Sumitomo Dainippon Pharma (Tokyo: 4506) merged two U.S. oncology companies it acquired in recent years, Boston Biomedical and Utah’s Tolero Pharmaceuticals. http://axios.link/AWm0

🍺 Vietnam’s government plans to sell its remaining 36% stake in listed brewer Sabeco by year-end. http://axios.link/6KE0

Fundraising

🚑 Biospring Partners, a new Boston-based venture firm focused on the intersection of life sciences and tech, is raising its debut fund, per an SEC filing. Its co-founders are Michelle Dipp (ex-General Atlantic) and Jennifer Lum (ex-Forge.ai). www.biospring.com

EQT is raising €12.5 billion for its fifth infrastructure fund. http://axios.link/pl1r

Kennet Partners raised €223 million for its fifth European growth equity fund. http://axios.link/QxAF

It's Personnel

Martin Witt joined Volvo to lead its corporate venture capital group. He previously was a managing director with Accenture. http://axios.link/84kS

Final Numbers
Data: Bureau of Labor Statistics; Chart: Axios Visuals

The U.S. economy added 4.8 million jobs in June, according to a Labor Department report released this morning, beating analyst estimates.

  • The unemployment rate fell from 13.3% to 11.1%.
  • But, but, but: The government's survey period ended before the recent coronavirus case surge, which has resulted in economic reopening pauses and rollback.
Dan Primack

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