May 15, 2017

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning

On Friday we mentioned new reports that Spotify is planning to go public on the NYSE via a so-called direct listing, with our sources saying that late 2017 is more likely than early 2018. Some notes:

  • Why? A direct listing would save Spotify some Wall Street underwriting fees, but that isn't the music streaming company's motivation. Instead, Spotify has watched the wild, post-IPO share price ride of consumer-facing companies like Facebook and Snapchat, and believes that a direct listing's lack of a quiet period could help the stock reach "equilibrium" quicker.
  • Why now? Spotify doesn't have immediate cash needs with $1.7 billion on its balance sheet, but the company is 11 years-old and early shareholders (particularly employees) want some liquidity.
  • Wildcard: Spotify raised $1 billion in convertible debt in March 2016 from TPG, Dragoneer and clients of Goldman Sachs. Terms of the deal were described by TechCrunch as "devilish," with the note-holders able to convert to common equity at a 20% discount to Spotify's eventual IPO price. Moreover, that discount began climbing by 2.5% per every six months, assuming that Spotify didn't go public one year after the debt issuance (which it didn't). But here's the big rub: Spotify isn't going to have an IPO price if it does a direct listing.

• Coming attractions: Defy.vc is just weeks away from a first close on over $100 million for its debut fund, according to an LP source. The Palo Alto-based VC firm was founded last year by Trae Vassallo (ex-Kleiner Perkins) and Neil Sequeria (ex-General Catalyst) to focus on early-stage opportunities in the "connected software" space. It also had expected to close the fund on $150 million in Q4, but apparently underestimated the timing difficulties of getting final signatures for a first-time fund. On Friday the firm made its first SEC filing, suggesting a $125 million target.

• Blinded me with science: Andreessen Horowitz's Vijay Pande talks to Axios about computational biology, as part of today's Science Stream launch:

We've seen the early victories but there is still work to do to be able to take all of the atoms in your body and all the information associated with it and turn it into a format that machines can learn.

In many cases, we don't have a ton of data. Especially in the area of drug design. You have a lot less data than you would when you are trying to train an algorithm to identify images. How can you look at a drug and tell whether it is successful? We think about drugs as locks and keys - the drug is the key, the protein is the lock. Often you compare keys to each other and you can tell whether it will open the same lock. The idea is that one shot learning can learn that so we can line up two models and tell you if this [drug] is successful, I think this one will also be successful.

• Strange bedfellows: Is there any odder investor/investee relationship right now than the one between GV and Uber? GV is a unit of Alphabet, which not only is suing Uber for trade theft, but also is now partnering with Uber nemesis Lyft on self-driving cars (following negotiations that seem to precede the legal spat).

Alt spectrum Q&A: Social Capital's Chamath Palihapitiya explains to Axios how his firm is investing in spectrum without participating in multi-billion dollar FCC auctions.

Where in the World? Tomorrow I'll be in New York City to interview Mark Cuban at the Lerer Hippeau Ventures CEO Summit. So if you have questions you think I should ask, send 'em on...

The BFD

• TPG Capital and Ontario Teachers' Pension Plan have revised their takeover offer for Australia's Fairfax Media (ASX: FXJ). The firms originally bid A$2.2 billion to acquire Fairfax's metro newspaper and real estate classifieds unit, but now are bidding A$2.76 billion for the entire company (which actually lowers the overall enterprise value a bit from the initial approach).

  • Why it's the BFD: Private equity firms have avoided mass-market print media for a while now, but TPG is betting that the value of the online real estate classifieds business (called Domain) is worth taking on not just the big metro dailies, but also a mishmash of smaller, regional papers. If TPG is successful, the big question for Australian news consumers, will be how long TPG can stomach that particular headache.
  • Bottom line: "The $2.76 billion now on the table will not be high enough to get the board to agree to open the company's books to TPG and its partner, Ontario Teachers' Pension Plan, but it is not far off. Key shareholders in the target company believe the bidding consortium now means business." ― Australian Financial Review
Venture Capital Deals

• Yixin Capital, a Chinese online auto financing platform, has raised $580 million in new VC funding from Tencent, Baidu, BitAuto, Chine Orient Asset Management and Wang Wei (founder of SF Express). http://bit.ly/2qHo0hm

• Spring, an apparel-focused ecommerce site, has raised $65 million in new VC funding. Fidelity led the round, and was joined by return backers Groupe Arnault, Thrive Capital and Box Group. http://bit.ly/2r4y3ce

• Yitu Technology, a Shanghai-based provider of facial recognition technology, has raised $55 million in Series C funding. Hillhouse Capital led the round, and was joined by Yunfeng Capital, Sequoia Capital, Banyan Capital and Zhen Fund. http://bit.ly/2pNmy95

• Wealthsimple, a Canadian robo-advisor, has raised C$50 million in new VC funding from Power Financial. http://tcrn.ch/2pGi3gp

• Wacai, a Chinese provider of personal finance apps, has raised $42 million in new VC funding. China Development Bank Capital led the round, and was joined by CBC Capital, New Horizon Capital, Qiming Venture Partners and Ally Bridge Group. http://bit.ly/2qn87JD

• Scientist.com, a San Diego-based online marketplace for outsourced scientific research, has raised $24 million in new VC funding. Leerink Transformation Partners and 5AM Ventures co-led the round, and were joined by Heritage Provider Network, Bootstrap Ventures and Hollywood producer Jack Giarraputo. http://bit.ly/2qJ3Ljg

• AdRise, a San Francisco-based Internet-connected TV platform, has secured $21 million of a new $24 million round, per an SEC filing that listed Bobby Yazdani (Signatures Capital) as a new board member. The company previously raised around $14 million from DHVC, Foundation Capital and Cota Capital. www.adrise.com

• Ruigu, a Chinese ecommerce platform focused on electrical hardware, has raised $14 million in Series B funding. Chengwei Capital led the round, and was joined by Source Code Capital. http://bit.ly/2pObcRc

• Cbien, a French inventory management app, has raised €8 million in second-round funding from MAIF, MACIF and 5M Ventures. http://bit.ly/2qkQnPj

• AppOnboard, a provider of mobile app demos before download, has raised $4 million in new VC funding from Troy Capital Partners and London Venture Partners. http://bit.ly/2pnypy9

• Truepic, a San Diego-based digital image and video authenticity platform, has raised $1.75 million in seed funding from Jeffrey Parker (ex-CEO of Thomson Financial), Flip Filipowsky (CEO of Platinum Technology) and Bill Sahlman (HBS). http://tcrn.ch/2qYTOOj

Private Equity Deals

Beringer Capital has acquired a majority stake in iCiDigital, a Raleigh, N.C.-based digital consultancy, for an undisclosed amount. www.icidigital.com

• Brookfield Asset Management has agreed to acquire a 20.3% stake in listed Brazilian renewable energy company Renovo Energia from Light SA. No financial terms were disclosed, although the position has a market value of around $64 million. http://reut.rs/2rh4rt1

• ControlExpert, a German provider of claims management services to the car insurance industry, has raised an undisclosed amount of growth equity funding from General Atlantic. www.controlexpert.com

Oakley Capital has acquired TechInsights, a Canadian provider of IP services, from Empris portfolio company AXIO Group for around £26 million. www.techinsights.com

Public Offerings

• Athenex, a Buffalo, N.Y.-based developer of cancer therapeutics, has filed for a $100 million IPO. It plans to trade on the Nasdaq under ticker symbol ATNX, with Credit Suisse listed as left lead underwriter. http://bit.ly/2r8GUNI

Oasis Midstream Partners LP, a Houston-based MLP formed by Oasis Petroleum (NYSE: OAS) to own gas and oil assets in the Williston Basin, has filed for a $100 million IPO. It plans to trade on the NYSE under ticker symbol OMP, with Morgan Stanley listed as left lead underwriter. http://bit.ly/2qIRpHZ

Liquidity Events

• EQT Partners has agreed to sell Bureau van Dijk, a Dutch publisher of private company data, to Moody's (NYSE: MCO) for €3 billion.

• Equistone Partners Europe has sold its majority stake in EuroAvionics, a German manufacturer of civil avionics systems, to Hensoldt, a spinoff of Airbus Group's defense electronics group. No financial terms were disclosed. www.euroavionics.com

• Gruppo Coin, an Italian retailer owned by BC Partners and Investindustrial, has sold a 12% stake in listed apparel retailer OVS (Milan: OVS) for €166 million, cutting its remaining position down to 30%. http://bit.ly/2qiKrIH

More M&A

• Atlantia (Milan: ATL) has offered to acquire Spainish toll road operator Abertis for €16.3 billion. http://reut.rs/2r8TqwP

• Hutchison Global Communications, a Hong Kong-based fixed-line phone operator, is seeking buyers in what could be a $1 billion sale, according to Bloomberg. https://bloom.bg/2qjeJL0

• Thermo Fisher Scientific (NYSE: TMO) is in talks to buy Patheon (NYSE: PTHN), a drug ingredients maker, for $5.2 billion (per share price is 35% premium to Friday's close). http://reut.rs/2pOlvEQ

• Vodacom of South Africa has agreed to acquire a 35% stake in Kenyan telecom company Safaricom from Vodafone (LSE: VOD) for $2.59 billion. http://reut.rs/2qjx36J

• Zuora, a Foster City, Calif.-based provider of subscription billing software, has acquired Leeyo, a San Jose, Calif.-based provider of revenue recognition automation software. No financial terms were disclosed. Zuora has raised around $250 million in VC funding. http://tcrn.ch/2pyJJUo

Fundraising

• Onex Corp. is targeting C$6.5 billion for its fifth private equity fund, per a public disclosure. The Toronto-based firm will contribute C$2 billion of the total. www.onex.com

It's Personnel

• Silicon Valley Bank has promoted CFO Michael Descheneaux to president, while Daniel Beck (former CFO of Bank of the West) will become CFO. www.svb.com

Final Numbers: European fundraising (€B)
Dan Primack