Axios Pro Rata

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October 01, 2021

📺 On Sunday's "Axios on HBO": Afghanistan's first female ambassador, Adela Raz, tells Jonathan Swan in an exclusive interview that she "didn't want to be the last." See a clip.

  • Plus, Jim VandeHei sits down with Jamie Dimon. 6pm ET/PT on all HBO platforms.

Top of the Morning

Animated illustration of a dumpster on fire.
Illustration: Aïda Amer/Axios

Good people quit good jobs to join Ozy Media. They believed in its mission, its leadership and its potential for wealth creation. Investors cut big checks in good faith. They were all betrayed.

The big picture: A horde of sources described a pattern of bad behavior, well beyond the failed fraud that was first reported Sunday by the NY Times.

What happened yesterday: Do you have a minute?

Marc Lasry stepped down from Ozy Media's board, saying: "I believe that going forward Ozy requires experience in areas like crisis management and investigations, where I do not have particular expertise."

  • This is just weeks after Lasry became chairman, and just days after initially saying that an investigation wasn't needed.
  • Axios learned that Lasry only invested $1 million of his own money in what we were told was a $35 million Series C round in 2019. At the time, CEO Carlos Watson referred to Lasry as that round's lead investor.

Watson in 2019 also told CNBC that Sharon and Ozzy Osborne had invested in his company. Sharon now says that never happened, adding: "This guy is the biggest shyster I have ever seen in my life."

Stories published Thursday by Bloomberg and CNN portray Watson as an erratic leader who used unprofessional practices to micromanage his staff. Oh, and some advertisers are fleeing.

But wait, there's more, per new reporting by me and Axios' Sara Fischer:

  • Just months after that $35 million funding round (for which there is no SEC filing), Ozy implemented 19% pay cuts, citing the pandemic, per multiple sources.
  • Eugene Robinson, Ozy's editor-at-large and one of its original hires, says he was fired for posting a story on his personal Substack, even though he had approval to do so from a senior editor (as verified via a screenshot shared with Axios). Watson allegedly told Robinson: "You were wrong for doing it and they were wrong for telling you to do it."
  • Robinson says he's free to speak with reporters because his severance negotiations, which would have included an NDA, broke down after Ozy insisted he remove a negative Glassdoor review that the company believed he had posted (Robinson denies it's his).
  • Other ex-employees tell Axios that management encouraged them to write positive Glassdoor reviews.
  • German publisher Axel Springer, an early Ozy investor, tells Axios that it gave up its right to a board seat and voting rights after only investing $300,000 in the Series C round. But Ozy continued to list Axel Springer's rep as an active director in a July 2021 filing with the state of Florida.
  • Several sources note Watson's penchant for Sunday meetings, and say he often strung employees for hours on Sunday. Some say Watson made it very hard to leave the company, and would continue to call after their departures.
  • People can be prone to badmouthing their ex-employers, but what we're getting here is a consistent story.
  • Axios reached out to a current member of Ozy's accounting department for clarification on revenue numbers that the company originally shared with us, but she hung up.

The bottom line: All we know for sure about Ozy is that there's bad news to come.

The BFD

Animated illustration of the Zoom logo with the two o's in the middle closing like a pair of eyes, then snapping back open.
Illustration: Aïda Amer/Axios

Five9 (Nasdaq: FIVN) shareholders rejected a takeover offer from Zoom (Nasdaq: ZM), prompting the companies to mutually terminate the deal.

  • Why it's the BFD: This reflects the risks faced by all-stock deals, particularly at narrow premiums, given that share prices can fluctuate between announcements and votes. The merger was valued at $14.7 billion at the outset but, because Zoom shares fell by 28%, today would have been worth closer to $11 billion. Five9 shares also dropped in the interim, but only by 11%.
  • Also: DOJ reportedly was investigating the merger on national security grounds, due to Zoom's ties to China, but Five9 shareholders put that inquiry to bed.
  • The bottom line: "Zoom was looking to Five9 to reduce its dependence on the video and audio meetings that have become so popular within businesses and other organizations. Factoring in the impact it expected from Five9, Zoom executives told analysts earlier this month that they were looking at a $91 billion total addressable market in 2025, up from $34 billion in 2019." — Jordan Novet, CNBC

Venture Capital Deals

Built Technologies, a Nashville-based construction finance platform, raised $125 million in Series D funding at a $1.5 billion valuation. TCV led, and was joined by Brookfield Technology Partners, 9Yards Capital, XYZ Venture Capital and HighSage Ventures. http://axios.link/btSL

PSPDFkit, an Austrian developer of APIs and an SDK for document processing features in apps, raised €100 million from Insight Partners. http://axios.link/Q72L

Materialize, a New York-based streaming SQL database startup, raised $60 million in Series C funding. Redpoint Ventures led, and was joined by Kleiner Perkins and Lightspeed Venture Partners. www.materialize.com

🚑 Activ Surgical, a Boston-based digital surgery startup, raised $45 million in Series B funding. Cota Capital led, and was joined by BAM Funds, Magnetar Capital, Mint Ventures, Castor Ventures, Dream One Vision and Nvidia. http://axios.link/PK6Y

🚑 Wider Circle, a Redwood City, Calif.-based hyper-local healthcare program and in-person social network for seniors, raised $38 million in Series B funding. AmeriHealth Caritas led, and was joined by Blue Venture Fund and Chicago Ventures. www.widercircle.com

Forta, a smart contracts security service formed by OpenZeppelin, raised $23 million led by Andreessen Horowitz. http://axios.link/VnAH

Higo, a Mexico City-based B2B payments platform for SMBs, raised $23 million in Series A funding. Accel led, and was joined by Tiger Global, Haystack, Homebrew, Audacious, Susa Ventures and J Ventures. http://axios.link/fLHF

🚑 Hemanext, a Lexington, Mass.-based blood storage tech startup, raised $15 million funding from backers like Antaeus Enterprises, Stephen Eckert and Omega Advisors. http://axios.link/05hy

QisstPay, a Pakistani BNPL startup, raised $15 million in seed funding. MSA Capital led, and was joined by Global Founders Fund, Fox Ventures and First Check Ventures. http://axios.link/lPET

Private Equity Deals

GTCR acquired PPC Flexible Packaging, a Buffalo Grove, Ill.-based flexographic printing company. www.ppcflex.com

KKR agreed to buy Australian outsourcing company Probe Group from Quadrant Private Equity and Five V Capital. No financial terms were disclosed, but Bloomberg previously reported a A$1.2 billion price. http://axios.link/SiGh

🍕 Meritage Group bought Lou Malnati’s, a Chicago-style pizza chain, per Bloomberg. http://axios.link/gHgn

🚑 TPG and Malaysia's Johor Corp. are prepping a takeover bid for listed Malaysian hospital operator KPJ Healthcare, per Bloomberg. http://axios.link/RIru

Public Offerings

🚑 Exscientia, a British AI drug discovery startup, raised $305 million in its IPO. It priced at the high end of its $20–$22 range, for a $2.6 billion market value, will list on the Nasdaq (EXAI) and raised over $400 million from firms like SoftBank, Evotec, Novo Holdings, BlackRock, Celgene, GT Healthcare Partners, Bristol-Myers Squibb and Casdin Capital. http://axios.link/yANJ

🥞 First Watch, a Bradenton, Fla.-based breakfast and lunch restaurant chain with over 420 U.S. locations, raised $170 million in its IPO. It priced at $18 ($17–$20 range), for a $1 billion market value, will list on the Nasdaq (FWRG) and reports nearly $2 million of net income on $281 million in revenue for the first half of 2021. Backers include Advent International. http://axios.link/OwWR

• Oyo, an Indian hotel chain, filed to raise over $1.1 billion in a local IPO. It has raised over $3 billion in private funding, most recently at a $9.6 billion valuation, from backers like SoftBank, Sequoia Capital India, Lightspeed Venture Partners Microsoft and Airbnb. http://axios.link/oCGu

TDCX, a Singapore-based provider of customer experience solutions to tech companies, raised $348 million in its IPO. It priced at the high end of its $16–$18 range, will list on the NYSE (TDCX), and reports $33 million of profit on $187 million in revenue for the first half of 2021. http://axios.link/ebdV

SPAC Stuff

• Parallel, a multi-state cannabis operator, and the Scooter Braun-backed SPAC Ceres Acquisition Corp. mutually terminated their $1.89 billion merger. http://axios.link/AVIp

Liquidity Events

🌼 Sun Capital Partners is seeking a buyer for Flamingo Horticulture, a British provider of flowers to supermarkets that could fetch more than €1 billion, per Bloomberg. http://axios.link/wlY2

Voodoo, a French casual mobile games maker valued by VCs at $2 billion, agreed to buy Beach Bum, an Israeli developer of tabletop and card videogames that had been seeded by Saban Capital Group, 83North and iAngels. http://axios.link/KG97

More M&A

Illustration of a roll of money in a life preserver.
Illustration: Aïda Amer/Axios

Starboard Value and Elliott Management have taken stakes in Willis Towers Watson (Nasdaq: WLTW), per the WSJ, just months after its $34 billion merger with rival insurance broker Aon (NYSE: AON) was blocked by U.S. antitrust regulators. http://axios.link/IMpw

Arctic Wolf Networks, a Sunnyvale, Calif.-based security operations center-as-a-service company valued by VCs at $4.3 billion, bought Habitu8, an LA-based security training and awareness content platform. http://axios.link/NdDV

Franklin Resources, a mutual funds manager, agreed to buy O’Shaughnessy Asset Management, a custom index firm with around $6.4 billion in AUM. http://axios.link/fzwD

PIF, Saudi Arabia's sovereign wealth fund, hired banks to sell part of its 70% stake in Saudi Telecom Co., in a deal that could fetch nearly $13 billion, per Bloomberg. http://axios.link/vv4b

Singapore Telecom sold a 70% stake in its Australian tower network to AustralianSuper for A$1.9 billion. http://axios.link/TKIP

Sony (Tokyo: 6758) acquired Bluepoint Games, an Austin, Texas-based gaming studio whose titles include "Shadow of the Colossus." http://axios.link/A2sQ

Fundraising

Counterpart Ventures, launched by Patrick Eggen (ex-Qualcomm Ventures) and Joe Saijo (ex-Recruit Strategic Partners), raised $110 million for its debut fund. http://axios.link/RPyj

It's Personnel

• Katherine Boyle joined Andreessen Horowitz as a general partner, focused on enterprise investing. She previously was with General Catalyst. www.a16z.com

Katie Evans joined Threshold Ventures. She previously was with JMI Equity. www.threshold.vc

Final Numbers

Data: Refinitiv; Chart: Thomas Oide/Axios
Data: Refinitiv; Chart: Thomas Oide/Axios

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