Dec 10, 2018

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning
Source: Giphy

Last week came news that three well-known, highly-valued tech startups have filed confidential IPO documents with U.S. securities regulators: Uber, Lyft and Slack.

  • The temptation is to write that the companies are reacting to the public equities pullback, particularly in tech stocks, by rushing to price before the IPO window slams shut.
  • The reality is that these plans have been in the works for months, including during the public equities surge in early Q3 and the post-Halloween sugar rush. Moreover, filing confidentially now guarantees nothing in terms of market conditions for when these companies could actually go public. For context, Snap filed confidentially in mid-November 2016 and didn't list until the beginning of March 2017.
  • Filing confidentially now is a recognition that everything is about to shut down for a couple weeks, so this puts them at the top of the queue once everyone's back at work on January 2.
  • The "IPO window" is a real factor for smaller or even mid-sized issuers, but these three can go when they're ready, almost regardless of macro market conditions.

There's also been talk that Uber and Lyft are "racing" each other to go public first. This one is a bit more complicated.

  • In the end, first to market won't much matter. Yes, the initial issuer will set some road show narrative and valuation multiples, but it should all come out in the wash after both companies begin trading. Just ask Box and Dropbox — which is a better comp than you might reflexively think, given that Uber and Lyft are pretty different companies in terms of both scale and product offerings, despite their shared core business of U.S. ride-hail.
  • That said, these two companies really, really, really don't like each other. Some of that animosity has ebbed in the post-Kalanick era, but bragging rights remain a motivator.
  • Neither Lyft nor Uber knows when they'll be able to go public, given that they represent a new category for securities regulators (unlike, say, Slack). If there are lots of questions, then filing now ensures that the actual pricing won't leak into early summer.
Also...

Elon Musk last night continued to poke the grizzly, by telling 60 Minutes:

"I want to be clear. I do not respect the SEC."
  • This related to how Musk and Tesla are handling settlements with the SEC over his infamous "funding secured" tweet, including an agreement his tweets be pre-approved if they contain information that may be material to the company or its shareholders.
  • Musk told 60 Minutes that, so far, he's in charge of deciding whether or not to submit tweets for pre-approval, and basically shrugged while acknowledging that such a process might result in "some mistakes."
  • Note that the settlement isn't actually in effect yet, as there was a 90-day window to build a compliance structure (deadline is Dec. 28). A Tesla spokesperson tells Axios that the policy will be in place on time, but wouldn't say if Musk will keep personally determining which of his tweets get reviewed.

Update: ParkJockey today confirmed our report from last week that it's received big funding from SoftBank and Mubadala to acquire two parking garage operators.

Shortlist: Blackstone Group senior advisor Wayne Berman is being floated as a possible replacement for John Kelly as White House Chief of Staff, just like he was when Reince Priebus was on his way out.

🎧 The Pro Rata podcast got a shoutout in the New York Times, and you can check out our most recent episode, focused on The Facebook Files, by going here.

The BFD
Source: Giphy

Good Money, a Los Angeles-based digital banking platform that will donate half of its profit to “impact projects,” raised $30 million in Series A funding. Galaxy Digital led, and was joined by Breyer Capital, Blocktower Capital, Boost VC, Blockchange Ventures, Cross Culture Capital and individual angels.

  • Why it's the BFD: Because everyone who opens a Good Money account will receive equity in the company, and they can earn even more by doing things like referring friends or setting up direct deposit. It sounds like a gimmick, but CEO Gunnar Lovelace says that customers could ultimately end up owning between 40% and 60% of the company's equity, which it plans to register by Q2 of next year via a Reg A+ offering. He adds that the customer equity grants are currently built into Good Money's ESOP.
  • Bottom line: "Since the financial crisis we've had a greater and greater concentration of wealth among a small group. We're interested in helping to democratize wealth ownership." — Gunnar Lovelace
Venture Capital Deals

G7, a Beijing-based fleet management company, raised $320 million. Hopu Investments led, and was joined by China Broadband Capital, Intelligent Fund of Funds, Mount Morning Capital, Total Energy Ventures, TH Capital and return backers Tencent, GLP and Bank of China Investments. http://axios.link/xOO7

Toss, a South Korean P2P digital wallet startup, raised $80 million at a $1.2 billion valuation. Kleiner Perkins and Ribbit Capital co-led, and were joined by Altos Ventures, Bessemer Venture Partners, Goodwater Capital, KTB Network, Novel, PayPal and Qualcomm Ventures. http://axios.link/rSOr

NavVis, a German provider of indoor spatial intelligence solutions for enterprises, raised $35.5 million in Series C funding. Digital+ Partners led, and was joined by Kozo Keikaku Engineering and return backers MIG, Target Partners and BayBG. www.navvis.com

Avochato, a San Francisco-based provider of text messaging software for CRM, raised $5 million in Series A funding led by Amity Ventures. www.avochato.com

Private Equity Deals

The Carlyle Group will acquire a majority stake in Accelerate Learning, a Houston-based provider of preK-12 STEM education products and services. Quad Partners also is investing, while existing backers include Owl Ventures and Rice Management Co. www.acceleratelearning.com

Siris Capital and Elliott Management agreed to buy Travelport Worldwide (NYSE: TVPT), a UK-based travel software company, for around $4.4 billion in cash (including assumption of $2.4b in debt), or $15.75 per share. Elliott disclosed a 12% stake in the company back in March and then pushed for a sale. http://axios.link/7BSC

🚑 TA Associates and GI Partners invested in Netsmart Technologies, an Overland Park, Kansas-based provider of electronic medical records and management process software, from Allscripts (Nasdaq: MDRX).www.ntst.com

Public Offerings

Three companies and two SPACs are expected to price IPOs on U.S. exchanges this week. Leading the pack is Tencent Music, which just got hit with fraud allegations from an early investor.

More M&A

🎥 Alibaba (NYSE: BABA) will increase its stake in movie studio Alibaba Pictures (HK: 1060) from 49% to 50.92%. http://axios.link/pF26

Facebook (Naasdaq: FB) said it will buy back an additional $9 billion of shares. http://axios.link/NFgH

Google acqui-hired the team of Sigmoid Labs, the maker of a train-tracking app in India, for between $30 million and $40 million. http://axios.link/5sR5

Junior Bridgeman, a former NBA player turned fast-food franchise mogul, is in advanced talks to buy Sports Illustrated for around $150 million from Meredith Corp. (NYSE: MDP), per Reuters. http://axios.link/nDV2

🚑 Tivity Health (Nasdaq: TVTY) agreed to buy diet plan company Nutrisystem (Nasdaq: NTRI) for $1.4 billion in cash and stock. http://axios.link/R09D

Fundraising

🚑 Advent Life Sciences is raising around $281 million for its third VC fund, per an SEC filing. www.adventls.com

EQT Partners closed its second mid-market credit fund with €2.3 billion. www.eqtpartners.com

Lindsay Goldberg is raising up to $4 billion for its fifth buyout fund, per a public pension document. www.lindsaygoldbergllc.com

TXV Partners, a Dallas-based VC firm focused on “millennial-friendly” startups in the consumer, fintech and blockchain spaces, raised $50 million for its debut fund. http://axios.link/3NXP

It's Personnel

Ted Eliopoulos, former chief investment officer for CalPERS, joined Morgan Stanley as vice chairman and head of strategic partnerships, per Institutional Investor. http://axios.link/IZ9Y

David Weild, former vice chair of the Nasdaq, joined Alzheimer’s-focused investment firm InvestAcure as co-founder and vice chairman. www.investacure.com

Final Numbers
Expand chart
Data: Factset; Chart: Lazaro Gamio/Axios

More from Felix Salmon:

The price on the benchmark 10-year Treasury bond rose from 100.22 on Monday morning to 102.12 at the close on Friday.
That's a massive move in the world of bond investors. It brought the yield on the bond from 3.04% all the way down to 2.85%. (Yields go down when prices go up.) Bonds vastly outperformed the stock market, which fell by 5.6% from Monday's open to Friday's close.
Dan Primack

Thanks for reading. If this was forwarded to you, please subscribe at GetProRata.axios.com.