Apr 13, 2020

Axios Pro Rata

By Dan Primack
Dan Primack

🚴 Inspiring: On Saturday, over 1,300 Axios Pro Rata readers rode their Peloton bikes at the same time to raise more than $160,000 for a Weill Cornell Medicine fund that provides childcare, meals, and other daily needs to front-line medical workers in New York City. Thank you so much for your time, your sweat, and your generosity.

🖥️ You're invited: Axios will host a live virtual event on the future of fintech and consumer privacy this Wednesday at 12:30 pm ET. Guests include Andrew Yang and Credit Karma CEO Kenneth Lin. Register here.

Top of the Morning

Illustration: Eniola Odetunde/Axios

America's economic crisis may soon expand to states, cities, and towns, Axios' Stef Kight and I report.

  • The big picture: State and local tax revenue is falling fast, particularly in areas heavily reliant on sales and tourism taxes, while spending rises from added unemployment and medical expenses.

This could become a nightmare scenario on par with what we're seeing on Main Street. And, like with Main Street, the most viable solution involves bolstered federal bailouts.

  • Tax experts tell Axios that many states could experience double-digit revenue misses for fiscal 2020, which ends in June. Plus, extended tax filings mean many states won't know their exact shortfalls until it's effectively too late to make requisite cuts. New Jersey is so worried that it extended its fiscal 2020 from the end of June until the end of September, while Nevada is asking all agencies for immediate 4% budget cut proposals.
  • And 2021 could be even bleaker, depending on when we get back to some semblance of normal. Arizona, for example, expects to flip from a $1 billion surplus in fiscal 2020 to a $1.1 billion deficit in fiscal 2021.

The most critical cases may be Florida and Louisiana, which both are in the top 10 for sales tax dependency and have rainy day funds that represent less than 5% of annual expenditures.

  • Both have been hit hard by the coronavirus, have large tourism and oil industries, and are at particular risk for hurricanes — opening the possibility of simultaneous state emergencies.
  • "There's no playbook," Louisiana State Treasurer John Schroder tells Axios. Past state emergencies and budget crises have been regional "and then the rest of the country comes in to the rescue. That ain't going to be happening this time."

There also will be shortfalls in cities, counties, and towns — many of which haven't yet debated or approved fiscal 2021 budgets because of bylaws that didn't anticipate governance-via-Zoom. Bankruptcies are a very real possibility.

  • "States aren't usually obligated to bail out a city if it goes under, but they do so anyway because of the signal it would send if they didn't," one tax researcher tells Axios. "But if suddenly a lot of them needed help all at once, I don't see how states could afford it."
  • Brookings recently analyzed the immediate fiscal impact of COVID-19 on cities, including tax types and at-risk jobs, and found that four of the top five most vulnerable were in Ohio.

Some states and cities also may try to issue new bonds, or refinance old ones.

  • It had become difficult even before the crisis to find buyers for general obligation bonds, although the Federal Reserve has implemented some crisis programs that could help create a market.
  • Credit ratings agencies have not yet re-rated any U.S. states, despite the pending fiscal troubles.

The bottom line: Individuals and companies were the first to feel the economic pain of COVID-19, but they may be just the tip of the spear.


Illustration: Sarah Grillo/Axios

Arcus Infrastructure Partners has received multiple binding offers for its 80% stake in Portuguese toll road operator Brisa, which originally was expected to net around €3 billion, per Bloomberg.

  • Why it's the BFD: This could be a litmus test for how investors view the future of office work. Portugal's toll road traffic has obviously tanked in the midst of lockdown, but long-term revenue trends will depend on how many people keep working from home after the pandemic subsides.
  • Suitors reportedly include Abertis Infrastructure, Globalvia, APG Groep, China State Construction Engineering Corp.
  • Bottom line: "Brisa is Portugal’s biggest toll-road operator and oversees 1,628 kilometers (1,012 miles) of roads in the country, including a network of 17 motorways." — Bloomberg
Pro Rata for Kids

Today's project is for your kid(s) to make a brand new snack, by combining two or more other foods. This could be a new breakfast cereal, some fruits that don't normally go together, unusual cracker mini-sandwiches, etc.

  • Yes, it's got to be something they want to try to eat. And it should get a name. Per usual, please send me photos.

On Friday I asked your kid(s) to draw or "make" their pets. Some of what came in:

Sloane (7) with her cat Bella.
Gabriel (8) and Nina (5) made friends for Dino, their hermit crab.
Venture Capital Deals

Thrasio, a New York-based acquirer of Amazon third-party private-label businesses, raised $75 million in Series B funding at over a $700 million valuation from return backers Peak6, Upper90, WTI, and River Park Ventures. The company also secured $35 million in new debt capacity. http://axios.link/YMxZ

Kargo, an Indonesia-based trucking and logistics startup, raised $31 million in Series A funding from Tenaya Capital, Sequoia India, Mirae Asset Management, and Intudo Ventures. http://axios.link/R64c

🚑 Darmiyan, a San Francisco-based provider of early Alzheimer’s disease diagnostics, raised $6 million in seed funding. Eisai led, and was joined by IT-Farm and YC. http://axios.link/Q7aG

AcreTrader, a Fayetteville, Ark.-based farmland investing platform, raised over $5 million in seed funding. RZC Investments led, and was joined by Revel Partners. http://axios.link/bOwQ

Tropic, a New York-based buyer enablement platform, raised $2.1 million in seed funding led by Founder Collective. http://axios.link/LKhT

🚑 Wellpay, a San Mateo, Calif.-based medical bills management platform, raised $3.8 million from 8vc, Mubadala Capital-Ventures, Montage Ventures, TTCER, and Advisorsfund. http://axios.link/v7H1

Private Equity Deals

🚑 Direct Healthcare Group, a British portfolio company of ArchiMed, acquired the European patient handling unit of Sweden-listed Handicare.

Public Offerings

No companies plan to go public this week on U.S. exchanges. http://axios.link/ghMH

Egypt postponed plans to float a minority stake in state-owned Banque du Caire, via an IPO that had been expected to raise around $500 million, due to the coronavirus. http://axios.link/SZBq

More M&A

🚑 Alnylam Pharma (Nasdaq: ALNY) secured $2 billion in new equity and debt investment from The Blackstone Group, including $1 billion for 10% of future royalties for a drug that treats high cholesterol. http://axios.link/oPSo

🚑 Johnson & Johnson’s (NYSE: JNJ) abandoned its $400 million agreement to buy surgical patch product TachoSil from Takeda (Tokyo: 4502), citing regulatory issues. http://axios.link/T2WM


Entrée Capital, an Israel-based VC firm, raised $100 million for its third fund. www.entreecapital.vc

GCM Grosvenor raised $540 million for its second buyouts co-investment opportunities fund. www.gcmgrosvenor.com

Renaissance Venture Capital of Michigan has secured around $45 million for its fourth fund, which is targeting a total of $100 million, per an SEC filing. www.renvcf.com

It's Personnel

Bessemer Venture Partners promoted Tomer Diari to vice president. www.bvp.com

David Levy, former president of Turner Broadcasting, joined Raine Group as a senior adviser. www.raine.com

Pradeep Ramamurthy joined OpenGate Capital as co-head of investor relations. He previously was a managing director with consulting firm Cauvery. www.opengatecapital.com

Final Numbers: Private equity LP sentiment
Source: Eaton Partners LP Pulse survey of more than 100 institutional investors, conducted between April 2, 2020-April 7, 2020.
Dan Primack

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