SubscribeArrow
Top of the Morning
Source: Giphy

WeWork's IPO is still not dead, and this morning the company tried breathing new life into it.

  • A new filing discloses significant changes to voting structure, lockups, profit-sharing, and succession-planning.

Almost all of this is about reducing the power of co-founder and CEO Adam Neumann, who remains more controversial among many investors than is WeWork's business model. As such, the company said it will:

  • Cut the power of Neumann's super-voting stock from 20 votes per share to 10 votes per share, and convert it to one vote per share if Neumann were to die or become incapacitated.
  • Give WeWork's board the ability to remove Neumann as CEO and choose a successor. It also plans to name an independent director by year-end.
  • Neumann already pledged not to sell any stock in the first year post-IPO, and now will limit any sales in years two and three to no more than 10% of his holdings.
  • Neumann also "will give to the company any profits he receives from the real estate transactions he has entered into with the company." Unclear if this also includes past profits.
  • All of this follows Neumann's recent return to the company of a $5.9 million stock payment for the "We" family of trademarks.

Bottom line: Last month we wrote that WeWork had put its IPO at risk via a series of unforced errors, many of which could be corrected in amended filings. The company has now done just that. What we still don't know is if fund managers will be willing to forgive and invest, or if they just can't shake their first impression.

Also...

Illustration: Sarah Grillo/Axios

We've spent lots of time castigating Leon Black for his continued relationship with Jeffrey Epstein, but have neglected to mention how famed entrepreneur, venture capitalist, and MIT Media Lab supporter Reid Hoffman also played a role in Epstein's image rehab project.

  • For example, Hoffman invited Epstein to a high-powered Silicon Valley dinner in 2015, where other guests included Mark Zuckerberg, Elon Musk, and Peter Thiel.
  • Hoffman yesterday apologized, in an exclusive statement to Axios.
  • "I helped to repair his reputation and perpetuate injustice. For this, I am deeply regretful."
  • Hoffman also drove another bus over former MIT Media Lab boss Joi Ito, saying that Ito had assured him that Epstein had cleared MIT's vetting process. Even if so, it's unclear why that would have outweighed Epstein's guilty plea from years earlier.
  • Go deeper: MIT and Jeffrey Epstein's billionaire enablers

BFD'oh: SmileDirectClub stock yesterday closed down 27.5% from its $23 per share IPO price.

  • SDC is the first new issue in three years to price above its proposed range, but then break IPO price on its first-day close, per Renaissance Capital.

One to watch: Federal investigators are asking questions of Mithril Capital, a growth equity firm co-founded by Peter Thiel, per Recode. No specifics yet on any potential misdeed, with Mithril saying that it's cooperating with the government in what it refers to as an "extortionate... plot by a self-serving ex-employee."

No deal: The London Stock Exchange (LSE: L) this morning rejected a proposed $39 billion takeover by the Hong Kong Exchange (HK: 0388), saying that it instead plans to proceed with its own $27 billion acquisition of financial data firm Refnitiv.

  • Lots of initial reaction was this one could face political headwinds, and it appears that LSE's board felt the same, per mention in its rejection letter of how HKEX's government relationships could "complicate matters."
  • LSE also told HKEX not to bother with a follow-up offer, writing: "The board unanimously rejects the conditional proposal and, given its fundamental flaws, sees no merit in further engagement."

🎧 Pro Rata Podcast digs into President Trump's proposal to ban flavored e-cigarettes. Listen here.

The BFD
Source: Giphy

Voyage, an autonomous ride-hail startup focused on retirement communities, raised $31 million in Series B funding. Franklin Templeton led, and was joined by Khosla Ventures, Chevron Technology Ventures, and the VC arm of Jaguar Land Rover.

  • Why it's the BFD: Because it's already operating autonomous vehicles in The Villages — America's most popular and perplexing mid-sized city with over 115,000 residents. It's the sort of valuable, real-world use case that often gets overlooked in favor of viral "sleeping Tesla driver" videos.
  • Bottom line: "Trendsetting grandparents , not car-averse urban millennia, might be the early adopters of self-driving cars." — Joann Muller, Axios
Venture Capital Deals

Element AI, a Montreal AI-as-a-service platform, raised C$200 million in Series B funding from CDPQ, Gouvernement du Québec and return backers Data Collective, BDC, Hanwha Asset Management, and Real Ventures. http://axios.link/5S1j

OKCredit, an Indian bookkeeping automation startup, raised $67 million in Series B funding co-led by Lightspeed Venture Partners and Tiger Global. http://axios.link/Su3M

Shape Security, a Mountain View, Calif.-based bot and online fraud mitigation startup, raised $51 million at a pre-money valuation of $1 billion. C5 Capital led, and was joined by return backers Kleiner Perkins, HPE, Norwest Ventures Partners, Focus Ventures, JetBlue Technology Ventures, Top Tier Capital Partners, and Epic Ventures. www.shapesecurity.com

Lacework, a Mountain View, Calif.-based provider of public cloud security automation solutions, raised $42 million from Sutter Hill Ventures and Liberty Ventures. http://axios.link/sHk1

🚑 Insilico Medicine, an “AI-powered” drug discovery startup, raised $37 million in Series B funding. Qiming Venture Partners led, and were joined by Eight Roads, F-Prime Capital, Lilly Asia Ventures, Sinovation Ventures, Baidu Ventures, Pavilion Capital, BOLD Capital Partners, and Juvenscence. http://axios.link/LUU9

🚑 Incredible Health, a San Francisco-based job marketplace for nurses, raised $15 million in Series A funding. Andreessen Horowitz led, and was joined by NFX, Obvious Ventures, Precursor Ventures, and Gingerbread Capital. http://axios.link/pNOu

Veo, a Danish “AI camera” for taping and streaming amateur soccer games, raised $6 million in Series A funding from Courtside.vc, Ventech Capital, and VC Seed Capital. http://axios.link/xcmU

Patch Homes, a non-debt home monetization platform, raised $5 million in Series A funding. Union Square Ventures led, and was joined by Tribe Capital and return backers Techstars Ventures and Breega Capital. http://axios.link/bqeo

Middesk, a San Francisco-based provider of corporate customer background checks, raised $4 million in first-round funding. Accel led, and was joined by Sequoia Capital. http://axios.link/FPlO

Prevu, a New York-based home-buying platform, raised $2 million in seed funding led by Corigin Ventures. www.prevu.com

Private Equity Deals

Canada Pension Plan Investment Board and Astra Infra (Indonesia) offered to buy PT Lintas Marga Sedaya, an Indonesian toll-road operator, for around $500 million from Malaysian sovereign wealth fund Khazanah, per Bloomberg. http://axios.link/b1Kv

Luminate Capital Partners invested in MSI Data, a Wisconsin-based provider of field service management software. http://axios.link/7uxw

🚑 TPG Capital and Malaysian conglomerate Hong Leong Group agreed to buy a portfolio of 30 mid-sized hospitals in India and Malaysia from Columbia Pacific Management for around $1.2 billion. Earlier reports had suggested a $2 billion asking price. http://axios.link/OK3E

Vector Capital invested in MoxiWorks, a Seattle-based real estate broker platform. http://axios.link/DPeP

Public Offerings

AllHome, a Philippines-based home furnishing retail chain, launched an IPO that could raise nearly $350 million. http://axios.link/2zwX

Cloudflare, a San Francisco-based provider of content delivery network services, raised $525 million in its IPO. The company priced 35 million shares at $15 (above upwardly-revised range), for an initial market cap of $4.4 billion. It will trade on the NYSE (NET) with Goldman Sachs as lead underwriter, and reports a $37 million net loss on $129 million in revenue for the first half of 2019. Cloudflare had raised over $400 million in VC funding, from firms like Fidelity (30.9% pre-IPO stake), Pelion Ventures (9.2%), NEA (8.8%), Venrock, Union Square Ventures, and Franklin Templeton. www.cloudflare.com

ESR Cayman, a logistics real estate group backed by Warburg Pincus, is relaunching its Hong Kong IPO, just months after pulling a proposed $1.2 billion float. http://axios.link/PGDg

🚑 Satsuma Pharmaceuticals, a South San Francisco-based developer of therapies for migraines, raised $83 million in its IPO. It sold 5.5 million shares at $15 (upsized from 5m shares, middle of range), for an initial market cap of $242 million, and will trade on the Nasdaq (STSA) with Credit Suisse as lead underwriter. The pre-revenue company raised $74 million in VC funding from firms like RA Capital (30.2% pre-IPO stake), TPG Biotech (16.1%), Wellington Management (10%), Osage University Partners (6%), CAM Capital (5.5%), and Cormorant Asset Management (5%). www.satsumarx.com

🚑 SpringWorks Therapeutics, a Stamford, Conn.-based developer of treatments for rare diseases and cancers, raised $162 million in its IPO. The company priced 9 million shares at $18 (upsized from 7.35m shares, top of price range), for an initial market cap of $754 million. It will trade on the Nasdaq (SWTX) and used JPMorgan as lead underwriter. The pre-revenue company raised $228 million in VC funding from firms like Bain Capital (21.69% pre-IPO stake), OrbiMed (21.69%), Pfizer (13.82%), and Perceptive Advisors (6.41%). www.springworkstx.com

• XP Investimentos, a Brazilian financial services group, hired JPMorgan, Goldman Sachs and Morgan Stanley to lead a U.S. IPO, per Reuters. http://axios.link/x1v8

Liquidity Events

KKR is considering a sale process for ELL, an Austrian and German train leasing business that could fetch over $1 billion (including debt), per Bloomberg. http://axios.link/znEc

More M&A

Cargill agreed to sell CarVal Investors, a fund manager with around $10 billion in AUM, to a group of 17 CarVal employees. http://axios.link/PTja

Greece’s privatization agency said it may sell a stake in the country’s largest oil refiner, Hellenic Petroleum. http://axios.link/FVwq

Ingka Group, the parent company of IKEA, will pay €136 million for an 80% stake in seven Romanian wind farms from Vestas (CPSE: VWS).

SSE (LSE: SSE) confirmed plans to sell its UK retail energy business to OVO Group for £500 million. http://axios.link/uQ0n

Fundraising

Ardian raised $2.5 billion for its fifth private equity co-investment fund. http://axios.link/JrZO

KPS Capital Partners is raising $5 billion for its fifth special situations fund. http://axios.link/r2pu

It's Personnel

Elizabeth Chou joined education-focused private equity firm Leeds Equity Partners. She previously was a general partner with New Markets Venture Partners. www.leedsequity.com

Dan Glickman joined private equity firm Harvest Partners as a partner. In April he stepped down as senior managing director of Antares, the mid-market lender acquired by CPPIB in 2015. www.harvpart.com

Sarah Puil joined Next Coast Ventures as an entrepreneur-in-residence. She previously was a VP at marketing company Civic Entertainment. www.nextcoastventures.com

Final Numbers: M&A volume
Source: Refinitiv. Data through Sept. 12, 2019

🙏 Thanks for reading Axios Pro Rata. Please ask your friends, colleagues, and Floridian grandparents to sign up.