May 15, 2020

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning

Illustration: Aïda Amer/Axios

Federal regulators still haven't provided the required guidance on Paycheck Protection Program loan forgiveness, a scant 18 days past deadline, but it's become less important for the vast majority of small business recipients.

Driving the news: The key buzzword this week was "safe harbor."

  • The Small Business Administration said it would provide safe harbor to all PPP borrowers of less than $2 million, in terms of deeming their certifications to have been made in good faith.
  • In other words, no more need to sweat over whether or not their applications met the "necessity" criteria.

It also extended the "safe harbor" for no-questions-asked loan returns to May 18. This is basically for borrowers of above $2 million, or smaller borrowers who have concerns about their applications other than the aforementioned "necessity" criteria.

  • An SBA spokesperson tells Axios that companies that returned PPP loans are allowed to reapply, so long as they no longer have an active E-Tran loan number.

But back to that lack of forgiveness guidance: It's still a real problem. Not just for larger borrowers, but even for smaller ones that have larger operational expenses than employee expenses.

  • A recent Inspector General report noted that "tens of thousands of borrowers" won't meet the SBA requirement that 75% of PPP loans be used on payroll.
  • Some suggest that this could be why so many small businesses, upwards of 25%, never even bothered applying for PPP.
  • There's speculation that the 75% floor could be lowered in forgiveness guidance, given that it doesn't appear in the actual CARES Act. But at this point it's hard to really know. As one banker said to me: "If you don't like the PPP rules today, don't worry about it because they'll change again tomorrow."

The bottom line: Flexibility for PPP borrowers has increased, particularly as social media attention and political criticism has waned.

The BFD

Illustration: Sarah Grillo/Axios

Virgin Australia (ASX: VAH), Australia's second-largest airline which filed for bankruptcy last month, is expected to receive upwards of eight indicative takeover bids today, per Reuters.

  • Why it's the BFD: Because it reflects the high value of duopoly, even in the midst of a pandemic that has been catastrophic for airlines.
  • Suitors include Bain Capital, Brookfield, BGH Capital/Temasek, and India's InterGlobe Enterprises.
  • The bottom line: "The offers ... will be whittled down to a shortlist of about three in coming days. ... The administrators at Deloitte aim to restructure what is the biggest Asia-Pacific casualty of the coronavirus crisis hitting the global aviation industry, and agree to deal with a buyer by the end of June." — Paulina Duran & Scott Murdoch, Reuters
Pro Rata for Kids

Today is the two-month anniversary of this section, which means it's nearly two months longer than I'd hoped it would have reason to exist. Several of you have asked for a collection of project suggestions, so I've posted 25 of them here.

  • This weekend's project is for your kids to look at the list and do one they haven't done before. And please be sure to send me pictures of what they create, cook, write, etc.

Yesterday's project was to create a book nook:

Lexi (age 6) and Emmy (2) made one with what they called “only the essentials." Their father thinks there's at least one book in there somewhere.
Venture Capital Deals

Monzo, a British digital challenger bank, is in talks to raise upwards of £80 million at a £1.25 billion valuation (down 40% from round last June), per the FT. http://axios.link/C5H7

DigitalOcean, a New York-based “cloud for developing modern apps,” raised $50 million in Series C funding at a $1.15 billion valuation. Access Industries led, and was joined by Andreessen Horowitz. http://axios.link/0le3

Matterport, a Sunnyvale, Calif.-based provider of 3D capture software, raised nearly $40 million in new VC funding, per an SEC filing. It previously raised over $100 million from firms like DCM, Lux Capital, Red Swan Ventures, Qualcomm Ventures, AMD Ventures, and Navitas Capital. www.matterport.com

Homeward, an Austin, Texas-based home buying and selling platform, raised $20 million in equity funding. Adams Street Partners led, and was joined by Javelin Venture Partners and LiveOak Venture Partners. The company also secured $85 million in debt financing. http://axios.link/RfRl

🚑 Immunai, a New York-based immune system mapping startup, raised $20 million in seed funding co-led by Viola Ventures and TLV Partners. http://axios.link/jTLL

🚑 Clear Labs, a Menlo Park-based next-generation-sequencing (NGS) diagnostics platform, raised $18 million. Redmile Group led, and was joined by return backers Wing VC, Menlo Ventures, Tyson Ventures, Khosla Ventures, GV, Felicis Ventures, and HBM Genomics. http://axios.link/QB6V

Liongard, a Houston-based unified automation platform for managed service providers, raised $17 million in Series B funding. Updata Partners led, and was joined by TDF Ventures and Integr8ted Capital. http://axios.link/vGNb

Rebag, a New York-based luxury handbag marketplace, raised $15 million in Series D funding. Novator led, and was joined by return backer General Catalyst. http://axios.link/tQm4

Virtana, a San Jose, Calif.-based hybrid cloud migration and optimization startup, raised $15 million from HighBar Partners and Benhamou Global Ventures. http://axios.link/f8H5

Traitify, a Baltimore-based personality assessment platform, raised $12 million led by JMI Holdings. http://axios.link/A6kr

Tock, a Chicago-based high-end restaurant and winery booking system, raised $10 million. Valor Siren Ventures led, and was joined by Origin Ventures. http://axios.link/BNdo

Private Equity Deals

iCapital Network agreed to buy Artivest, a New York-based online platform for investing in private equity and hedge funds. Existing Artivest investor KKR will roll over its shares, while other Artivest backers included Aquiline Capital Partners, Genstar Capital, and Thiel Capital. iCapital recently raised $146 million from Ping An Insurance, UBS, Blackstone Group, WestCap Group, Goldman Sachs, and Hamilton Lane. http://axios.link/d7Eo

Shimao Property Holdings (HK: 813) said its property management unit secured a $244 million investment from Sequoia Capital China and Tencent. http://axios.link/o7ya

Public Offerings

🚑 ADC Therapeutics, a Swiss biotech focused on difficult-to-treat cancers, raised $233 million in its IPO. The company priced 12.2 million shares at $19, versus its initial plan to offer 7.4 million shares at $16-$18. It will trade on the NYSE (ADCT), used Morgan Stanley as lead underwriter, and had raised nearly $600 million from firms like Auven Therapeutics (41% pre-IPO stake), AstraZeneca (6.7%), and Redmile Group (5.7%).

  • Worth noting that ADC pulled its IPO last October due to "adverse market conditions." And then went public in May 2020!

Allpark, a Brazilian lot operator, plans to raise $59 million at around a $340 million valuation via a Sao Paulo IPO. http://axios.link/dmnv

SelectQuote, an Overland Park, Kansas-based insurance policy comparison site, set IPO terms to 25 million shares at $17-$19. It would have an initial market cap of $1.13 billion, were it to price in the middle, and plans to trade on the NYSE (SLQT) with Credit Suisse and Morgan Stanley as lead underwriters. The company reports $37 million of profit on $241 million in revenue for the last six months of 2019. Brookside Equity Partners holds just over a 20% pre-IPO stake. http://axios.link/bIRc

Liquidity Events

Apple (Nasdaq: APPLE) bought NextVR, a Newport Beach, Calif.-based live VR streaming company. It had raised over $100 million from firms like Comcast Ventures, Formation 8, Dick Clark Productions, CITC, and China Culture Group. http://axios.link/Tkzg

Microsoft (Nasdaq: MSFT) agreed to buy Metaswitch Networks, a U.K.-based provider of cloud communications products for carriers and network providers. Sellers include Northgate Capital, WRV, Francisco Partners, and Sequoia Capital. http://axios.link/wnrS

More M&A

BT (LSE: BT) has held talks about selling a “multi-billion pound” stake in broadband network operator Openreach, which could have an enterprise value of around $28 billion, per the FT. http://axios.link/FPE0

Deutsche Bank is considering a sale process for its German online bank Norisbank, per Reuters.

Goldman Sachs (NYSE: GS) agreed to buy Folio Financial, a boutique wealth management custodian. http://axios.link/cm5R

Fundraising

Cathay Innovation raised $550 million for its second global VC fund. http://axios.link/j0zU

🏀 Dyal Capital is raising $500 million for a fund that would buy minority stakes in NBA franchises, per Bloomberg. http://axios.link/mVVE

Fintop Capital, a Nashville-based VC firm focused on fintech-focused B2B SaaS startups, raised $126 million for its second fund. http://axios.link/bkS6

G20 Ventures of Boston is raising $60 million for its third fund, per an SEC filing. http://www.g20vc.com

Mantis, a VC firm formed by musical act the Chainsmokers, is raising $50 million for its debut fund, per Bloomberg. Seriously. http://axios.link/RUHE

One Rock Capital Partners is raising $1.5 billion for its third mid-market buyout fund, per public pension documents. http://axios.link/qpB1

Quantum Energy Partners is seeking $5.5 billion for a new energy-focused private equity fund, per Bloomberg. http://axios.link/zpxb

Redstone Digital, a German VC firm, is raising €200 million for a new fund. http://axios.link/DIR2

Rubicon Technology Partners, a Colorado-based private equity firm focused on enterprise software, raised over $1.25 billion for its third fund. http://axios.link/a5Fk

Stellex Capital Management is targeting $1.25 billion for its second mid-market buyout fund, per public pension documents. http://axios.link/jcU9

Sterling Group, a Houston-based mid-market private equity firm, is raiisng $1.75 billion for its fifth fund, per an SEC filing. www.sterling-group.com

It's Personnel

Jeff Bistrong joined mid-market private equity firm HKW as a partner. He previously founded and led the TMT group at Harris Williams. www.hkwinc.com

Vishnu Srinivasan joined The Ohio State University as chief investment officer. He previously was a managing director with Pritzker Family Foundations. http://axios.link/KyLg

Final Numbers
Data: U.S. Census Bureau; Cartogram: Axios Visuals
Dan Primack

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