Sep 28, 2018

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning

Illustration: Rebecca Zisser / Axios

Elon Musk has been regularly compared to Donald Trump for their similar Twitter habits. Now we've learned of yet another parallel: A refusal to correct an obvious falsehood, even when the consequences of that refusal could be far more damaging than the original misstatement.

  • The SEC yesterday sued Musk for allegedly making several false statements, related to his abandoned efforts to take Tesla Motors private. In short, regulators allege that Musk didn't have anything close to "funding secured" for a buyout at $420 per share, having never discussed specific pricing with prospective partners, and that the $420 figure itself was indeed related to slang for marijuana. Read the lawsuit.
  • The civil complaint came hours after Musk reportedly pulled the plug on a settlement that would have included: A 2-year ban on serving as Tesla chairman, a fine for both Musk and Tesla, and a requirement that Tesla add two new independent directors. Musk would not have been required to admit wrongdoing, and he could have remained CEO.
  • By not taking the settlement, Musk faces a very real possibility that he'll be banned from being either CEO or a director of not just Tesla, but any other public company, for a significant period of time.
  • He also could face criminal charges by the U.S. Justice Department, if it determined that Musk's misstatements weren't just reckless, but were also motivated either by a desire for personal gain or revenge against short sellers of Tesla stock.
  • Not settling also makes it easier for shareholders to sue. Shares opened this morning down 12%, representing more than $6.3 billion in lost market cap since yesterday's close.

The bottom line is that Musk didn’t just make an unforced error. He compounded it both at the time, by not simply retracting his initial tweet, and then yesterday by throwing his racket at the umpires.

• Time to Vote: Axios has learned that TPG Capital is giving all 800 of its US employees up for four hours off on November 6, so that they can go to the polls. This is part of a national nonpartisan campaign, and TPG also sent a letter on Tuesday to all of its portfolio company CEOs, asking that they consider participating.

• Corporate American sexism: FactSet reports that only 36 companies in the Russell 3000 have either female-majority boards of 50/50 gender parity on their boards. Or, put another way, over 98% of companies in the Russell 3000 have male-majority boards of directors (including 18% with no women at all).

• Deal data: Global announced M&A volume for 2018 is now at $3.24 trillion, including $1.33 trillion in the US, per Thomson Reuters. Those are up 38% and 50%, respectively, over the first nine months of 2017.

🎧 Pro Rata Podcast: Our latest episode focuses on on the mounting mess at Facebook. Listen here.

The BFD

Funding Circle, a British peer-to-peer lender, raised £300 million in a London IPO that valued the company at around £1.5 billion.

  • Why it's the BFD: Because it could convince other large European tech companies that they can viably float in London instead of New York, particularly given that Funding Circle is a fin-tech listing in the midst of Brexit.
  • Deal details: Funding Circle priced at the bottom of its expected range, and had raised VC funding from firms like Accel, Ballie Gifford, Rocket Internet, DST and BlackRock.
  • Bottom line: "Funding Circle’s online lending platform enables investors including banks, asset managers, insurers, government-backed entities and funds to lend to small and medium-sized businesses in Britain, the United State, Germany and the Netherlands." — Dasha Afanasieva, Reuters
Venture Capital Deals

🚑 KSQ Therapeutics, a Cambridge, Mass-based drug discovery startup that utilizes CRISPR-Cas9 gene editing, raised $76 million in Series B funding. Flagship Pioneering led, and was joined by Polaris Partners, ARCH Venture Partners and Alexandria Equities. http://axios.link/XAIy

• Pymetrics, a New York-based online recruitment platform, raised $40 million. General Atlantic led, and was joined by Salesforce Ventures, Workday Ventures and return backers Jazz Venture Partners and Khosla Ventures. http://axios.link/SYzn

🚑 Akrevia Therapeutics, a Cambridge, Mass.-based immunotherapy company, raised $30 million in Series A funding co-led by F-Prime Capital Partners and Atlas Venture. The financing sets up a team led by ex-Ariad and Intellia executives to advance a pipeline of immuno-oncology candidates. http://axios.link/7PLq

• Netradyne, a San Diego-based AI startup focused on driver and fleet safety, raised $21 million in Series B funding. Return backer Reliance Industries led, and was joined by M12 and Point72 Ventures. http://axios.link/KGg4

• Guardhat, a Detroit-based developer of wearables for industrial workers, raised $20 million in Series A funding. RTP Ventures led, and was joined by 3M Ventures, Caterpillar VC, Revolution's Rise of the Rest Seed Fund, SVB and Detroit Venture Partners. http://axios.link/9dZ2

Capella Space, a San Francisco-based provider of on-demand Earth observation data via space radar, raised $19 million in Series B funding. Spark Capital and DCVC co-led, and were joined by Mark VC and Harmony Partners. www.capellaspace.com

Broadly, an Oakland-based mobile chat platform for local businesses, raised $10 million in Series B funding. Foundry Group led, and was joined by Calibrate Ventures and Team Builder Ventures. www.broadly.com

Dailylook, a Los Angeles-based personal styling service, raised $8 million in Series A funding co-led by Forever 21 and Upfront Ventures. www.dailylook.com

HqO, a Boston-based tenant experience platform for commercial real estate, raised $6.6 million in seed funding from Accomplice, JLL Spark, Navitas Capital, DivcoWest and Prizker Group VC. www.hqo.com

SoloLearn, a Pleasanton, Caif.-based software developer community, raised $5.6 million in Series A funding from Naspers Ventures and return backer Learn Capital. www.sololearn.com

Xiaozhu.com, a Chinese version of Airbnb, is in talks with GIC and others to raise $200 million in Series F funding, per ChinaMoneyNetwork. http://axios.link/lbjk

Private Equity Deals

Blackstone and KKR have expressed interest in buying a stake in Indian finance conglomerate Shriram Group from shareholders like TPG, per Bloomberg. A deal could be worth around $3 billion. http://axios.link/6XEI

Battery Ventures agreed to buy TTP Labtech, a UK-based maker of liquid-handling instrumentation and scientific sample storage systems. www.ttplabtech.com

HIG Capital acquired Iron Bow, a Herndon, Va.-based provider of IT solutions to government and commercial clients. www.ironbow.com

🚑 OSG Billing Services, a Ridgefield Park, N.J.-based portfolio company of Aquiline Capital Partners, acquired AppRev, a Temple, Texas-based provider of revenue cycle performance software for the healthcare market. www.apprev.com

Public Offerings

CooTek, a Chinese maker of keyboard software for smartphones, raised $52 million in its IPO. The company priced 4.35 million shares at $12 (low end of range), and will trade on the NYSE (CTK). Shareholders include Qiming Venture Partners (18.2% pre-IPO stake) and Sequoia Capital (17.9%). http://axios.link/dk6q

Perella Weinberg Partners, a New York-based financial advisory firm, picked Goldman Sachs and JPMorgan to lead an upcoming IPO, per Reuters. Public paperwork could be filed before year-end. http://axios.link/rYZa

Liquidity Events

Cognizant (Nasdaq: CTSH) is in talks to buy Softvision, an Oakland-based provider of IT services to retailers, for around $550 million, per Reuters. Sellers would include Tower Arch Capital. http://axios.link/URQo

🐝 Pacific Equity Partners agreed to sell New Zealand-based honey producer Manuka Health to Malaysia’s Hong Leong Group for more than A$200 million. http://axios.link/zaCL

Relias, a Cary, N.C.-based online education company owned by Bertelsmann, acquired OnCourse Learning, an online provider of online education for healthcare and finance/real estate professionals, from CIP Capital for $500 million. http://axios.link/Ghjl

More M&A

Bank of Australia has received at least five bids for its majority stake in an Indonesian insurance unit, which could fetch upwards of $300 million, per Reuters. Suitors include Sun Life (TSX: SLF) and Prudential (LSE: PRU). http://axios.link/bMgo

Fundraising

Banque Internationale à Luxembourg has formed a private equity fund-of-funds for its high net worth clients, per PE International. http://axios.link/bRnn

Troy Capital Partners raised $200 million for a fund that provides loans to VC-backed startup employees. http://axios.link/RfuP

It's Personnel

Chris Bartlett joined Verizon Ventures as SVP of corporate development and head of Verizon Ventures. He previously led North American media and communications M&A at Morgan Stanley. www.verizonventures.com

Len Laufer has left JPMorgan to join Cerberus Capital Management as head of a new group that will help portfolio companies leverage emerging tech like blockchain and machine learning, per Bloomberg. http://axios.link/vJMD

Brian Sapp joined Runway Growth Capital as a managing director and head of West Coast origination. He previously was a managing director with Hercules Capital. www.runwaygrowth.com

Karthik Subramanian joined Evolution Equity Partners as a partner. He previously led cybersecurity acquisitions and investments for Cisco. www.evolutionequity.com

Final Numbers
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Data: FactSet; Chart: Harry Stevens/Axios
Dan Primack