Dec 22, 2020

Axios Pro Rata

🏀 Axios Re:Cap digs into the biz of pandemic basketball with Milwaukee Bucks co-owner Marc Lasry, ahead of tonight's NBA season tip-off.

Top of the Morning

Illustration: Sarah Grillo/Axios

Ripple, one of the world’s most valuable cryptocurrency companies, last night disclosed that the SEC plans to sue the company, its CEO and its executive chairman for allegedly selling unlicensed securities.

Why it matters: This could put a chill on some crypto industry investment, as Ripple has no interest in settling fast and moving on. It also could mildly complicate the upcoming IPO for Coinbase, where XRP-to-dollar activity made up around 15% of trading volume over the past 30 days (per Nomics).

The basic backstory: Ripple in 2012 conjured a cryptocurrency called XRP, and has been gradually selling it off in scheduled allotments. This differs from the “mining” process used to create more traditionally-decentralized tokens like Bitcoin and Ether.

  • XRP’s current total value is around $22 billion, with Ripple still holding the majority of it in its treasury.
  • Ripple didn't register XRP as a security before selling it to third-party investors. Instead, it’s maintained that XRP is a virtual currency, in part relying on definitions contained in a 2015 settlement with the U.S. Justice Department (whose investigation was led by Katie Haun, now a partner with early Ripple investor Andreessen Horowitz).
  • The SEC has determined that several cryptocurrencies, including Bitcoin and Ethereum, are not securities. But it's also argued that certain cryptocurrencies are securities, and that others were securities at the time of initial sale and later morphed into virtual currencies. Those falling afoul of the SEC have included Kik/Kin and Telegram.
  • In this case, the SEC believes XRP was a security both at the time of sale and today, Ripple CEO Brad Garlinghouse tells me.

Garlinghouse says that the company has been in consistent talks with the SEC for years, but that he didn't know a lawsuit was imminent until yesterday.

  • He argues that outgoing SEC commissioner Jay Clayton is "picking winners" and seeking to codify a Bitcoin/Ether duopoly. "This is what an authoritarian government like China would do."
  • He also argues that Ripple's control over XRP is overstated, saying the company recently opposed two proposed developer changes and was outvoted.
  • When I asked if he has the stomach for a prolonged legal fight with the U.S. government, he laughingly replied: "How long have you known me?"

Crypto VCs are split on the significance of this pending suit beyond Ripple and the XRP ecosystem.

  • Some say they plan to take a breather until they have a better understanding of the SEC's argument, Ripple's defense and how both could apply to other cryptocurrency upstarts. They also want to see who Joe Biden picks to succeed Jay Clayton and watch how proposed Treasury Department rule-making plays out.
  • Others believe this is an issue specific to Ripple, which has long been a crypto industry lightning rod, and that the SEC's actions have little bearing on startup activity — particularly efforts building on top of Bitcoin or Ether.

The bottom line: Jay Clayton is dropping a bomb on his way out the door, and the crypto industry will be left to assess the damage.

  • Interested in more Axios crypto content? Please click here to be on our list if we launch something in the space.
The BFD

Source: GIPHY

MGM Holdings, the Hollywood home of James Bond, is seeking a buyer at around a $5.5 billion valuation (including debt), as first reported by the WSJ.

  • Why it's the BFD: Streaming companies are thirsty for established IP and content libraries, particularly given the success of Disney+ with its Star Wars and Marvel properties.
  • MGM's film franchises include Rocky, Terminator, Legally Blonde and The Hobbit, while its TV shows include The Handmaid's Tale and Fargo.
  • Sellers would include hedge fund Anchorage Capital Group, which is led by MGM chairman Kevin Ulrich.
  • The bottom line: "In 2018, MGM fired its then-chief executive, Hollywood veteran Gary Barber, for having early, unsanctioned conversations with Apple to sell the studio for more than $6 billion. ... Ulrich told studio investors at the time he could sell MGM for more than $8 billion in two to three years. ... But the price of the company’s shares, which are privately traded, has dropped steeply since then. It trades around $80, well above the $17 a share it commanded coming out of bankruptcy in 2010 but below the about $120 it traded around in 2018 in hopes of the Apple deal." — WSJ
Venture Capital Deals

Horizon Robotics, a Chinese AI chips developer, raised $150 million in Series C funding from 5Y Capital, Hillhouse Capital, KTB Network and Capital Today. The company is targeting a round total of $700 million. http://axios.link/eGR4

Glance, a Singapore-based lock screen platform owned by InMobi Group, raised $145 million from Google and return backer Mithril Capital. www.glance.com

Project44, a Chicago-based provider of supply chain visibility solutions, raised $100 million in Series D funding. Insight Partners led and was joined by 8VC, Emergence Capital, Omidyar Technology Ventures, Sapphire Ventures, Sozo Ventures and Underscore VC. http://axios.link/dyvy

Ironclad, a San Francisco-based provider of digital contract management software, raised at least $100 million led by Bond at a valuation north of $950 million, per The Information. Existing backers include Accel, Sequoia Capital and YC. http://axios.link/n1tC

Liberis, a British provider of financing solutions for SMEs, raised £70 million in equity and debt funding from British Business Investments, Paragon Bank, BCI Europe and Silicon Valley Bank. http://axios.link/HW9S

Qualia, a San Francisco-based real estate tech startup aimed at streamlining the home closing process, raised $65 million in Series D funding at a valuation north of $1 billion. Tiger Global led and was joined by fellow insiders 8VC and Menlo Ventures. http://axios.link/VW3Q

🛴 Superpedestrian, a Boston-based scooter fleet developer, raised $60 million from Citi Impact Fund, OurCrowd and Winthrop Square Capital. http://axios.link/r9KL

🚑 Peptilogics, a Pittsburgh-based developer of peptide-based therapeutics for treating prosthetic joint infections, raised $35.4 million in Series B funding. Presight Capital led and was joined by Founders Fund and return backer Peter Thiel. http://axios.link/nb86

Dialpad, a San Francisco-based cloud business phone and contact center provider, raised $10 million from SoftBank. It’s part of a Series E round led by OMERS that previously closed on $100 million at a $1.2 billion valuation. http://axios.link/aRY6

Eneba, a Lithuania-based marketplace for gamers, raised $8 million from Practica Capital and InReach Ventures. http://axios.link/VTKQ

🚑 LifeRaft, an Oakland-based health insure-tech startup, raised $3.5 million in seed funding co-led by Costanoa Ventures and XYZ VC. www.liferaft.co

ReturnSafe, an Austin, Texas-based provider of workplace safety and disease management solutions, raised $3.25 million co-led by Fifty Years and Active Capital. www.returnsafe.com

Topl, a Houston-based blockchain platform to help companies prove ethical and sustainable practices, raised $3 million in seed funding led by Mercury Fund. http://axios.link/WT8x

Perch, a Los Angeles-based credit building platform, raised $2.5 million in seed funding from Marcy Venture Partners, Citi, Softbank Opportunity Fund, Concrete Rose and Village Capital. http://axios.link/4uHW

Private Equity Deals

Apollo Global Management upped its takeover offer for casino group Great Canadian Gaming (TSX: GC) from C$39 per share to C$45 per share, winning over some shareholders that previously opposed the deal. http://axios.link/oQ0r

Elliott Management said it will no longer pursue a takeover of Swiss baker Aryzta (SWX: ARYN), after its $902 million offer was rebuffed. http://axios.link/RyZs

NuWave Solutions, a McLean, Va.-based portfolio company of AE Industrial Partners, acquired ProModel Government Services, a provider of predictive and prescriptive analytic software solutions for DOD and U.S. government clients. www.nuwavesolutions.com

Public Offerings

Source: GIPHY

🚑 Oscar, the health insurance company co-founded in 2012 by Joshua Kushner and Mario Schlosser, said it filed confidential IPO papers with the SEC. Axios previously reported on public plans for the company, which last week raised $140 million in new VC funding at a $6 billion valuation.

Playtika, an Israeli mobile gaming company, filed for an IPO that prior reports suggest could seek to raise $1 billion. It plans to list on the Nasdaq (PLTK) and reports $16 million of net income on $1.8 billion in revenue for the first nine months of 2020. Playtika was acquired in 2016 for $4.4 billion by a Chinese investor group that included Shanghai Giant Network Technology, Jack Ma, Yunfeng Capital, China Oceanwide Holdings Group, China Minsheng Trust, CDH China HF Holdings, Netmarble Games and Hony Capital http://axios.link/iOb3

WealthNavi, a Japanese robo-adviser, raised $173 million in a Tokyo IPO at an initial market value of $502 million. It had raised around $100 million in VC funding from firms like DBJ Capital, Global Brain, Mizuho Capital Partners, Resona Capital and SMBC VC. http://axios.link/wfIB

SPAC Stuff

Janus International Group, a Temple, Ga.-based provider of self-storage solutions owned by Clearlake Capital Group, agreed to go public via a reverse merger with Juniper Industrial Holdings (NYSE: JIH), a SPAC led by former Honeywell exec Brian Scott Cook. The deal values Janus at $1.9 billion, including a $250 million PIPE from backers like Fidelity and Baron Capital Group. http://axios.link/9yzM

Ouster, a San Francisco-based developer of lidar sensors for autonomous cars, agreed to go public via a reverse merger with Colonnade Acquisition Corp. (NYSE: CLA) at a $1.9 billion valuation. Ouster raised $142 million in VC funding from firms like Cox Enterprises, Tao Capital Partners, Fontinalis Partners and Runway Growth Capital. http://axios.link/xWzk

SoftBank officially filed for its SPAC, with plans to raise $525 million. SoftBank itself plans to commit an additional $250 million to the effort, and both SoftBank and SPAC management will be locked up for one year post-business combination.

Crucible Acquisition, a tech-focused SPAC formed by Brad Feld (Foundry Group) and James Lejeal (ex-Splunk), filed for a $200 million IPO. http://axios.link/cxiY

Global Partner Acquisition II, a consumer and commerce-focused SPAC led by Paul Zepf (ex-TowerBrook Capital Partners, Golub Capital), filed for a $250 million IPO. http://axios.link/in37

Group Nine Acquisition, a media-focused SPAC formed by Group Nine Media, filed for a $200 million IPO. http://axios.link/XFrk

Kairos Acquisition, an insurance-focused SPAC led by Peter Bang (ex-ERG Capital Partners), filed for a $200 million IPO. http://axios.link/oEy1

🚑 Healthcare Capital Corp., a health care-focused SPAC formed by David Milch, filed for a $200 million IPO. http://axios.link/6z7M

🚑 Locust Walk Acquisition, a health care-focused SPAC formed by Locust Walk Partners, filed for a $130 million IPO. http://axios.link/8kZ1

Mountain Crest Acquisition II, a SPAC focused on a North American business with “under-researched assets,” filed for a $50 million IPO. http://axios.link/RHTb

Pioneer Merger, a SPAC formed by Falcon Edge Capital and Patriot Global Management, filed for a $350 million IPO. http://axios.link/77J7

🚑 Omega Alpha SPAC, a biotech-focused SPAC formed by Omega Funds, filed for a $100 million IPO. http://axios.link/xC7c

Star Peak Corp. II, a sustainability sector-focused SPAC formed by Magnetar Capital, filed for a $350 million IPO. http://axios.link/Lsll

Switchback II Corp., an energy-focused SPAC, filed for a $250 million IPO. http://axios.link/2Qpu

Liquidity Events

Illustration: Sarah Grillo/Axios

Peloton (Nasdaq: PTON) agreed to buy Woodinville, Wash.-based commercial fitness equipment maker Precor for $420 million. The seller is Finland’s Amer Sports, whose investors include ANTA Sports, FountainVest Partners, Tencent and Anamered Investments. http://axios.link/payc

IBM (NYSE: IBM) agreed to buy Nordcloud, a Finnish multicloud consulting firm that had raised over $25 million from firms like OP Financial Group and Finnvera. http://axios.link/FqQH

Moog (NYSE: MOG) bought Genesys Aerosystems, a Mineral Wells, Texas-based provider of avionics systems, from McNally Capital. www.genesys-aerosystems.com

Platinum Equity sold Compart Systems, a Singapore-based maker of machined metal components, to Shanghai Wanye Enterprises for around $398 million.

RingCentral (NYSE: RNG) acquired DeepAffects, a Milpitas, Calif.-based conversational intelligence startup that had been seeded by VDOSH. http://axios.link/sOJt

More M&A

ByteDance is in talks to invest in Chinese mobile games publisher CMGE Technology Group (HK: 00302), per Reuters. http://axios.link/F1bA

European Union antitrust regulators are launching an investigation of Aon’s (NYSE: AON) $30 billion bid for rival insurance broker Willis Towers Watson (Nasdaq: WLTW). http://axios.link/kaHd

Magazine Luiza, a Brazilian retailer, agreed to buy digital payments firm Hub Prepaid Participações for around $56 million. http://axios.link/bYIK

Fundraising

Footwork is raising $150 million for its debut VC fund, Axios' Kia Kokalitcheva reports. It's led by Nikhil Basu Trivedi, previously a GP at Shasta Ventures, and Mike Smith, who was COO and president at Stitch Fix. http://axios.link/7G3w

Case Verde Capital, the cannabis-focused VC firm founded by Snoop Dogg, raised $100 million for a new fund, per SEC filings. http://axios.link/taTp

It's Personnel

Matt Goulding joined law firm Latham & Watkins as a partner, where he’ll focus on private equity transactions. He previously was with Weil, Gotshal & Manges. www.lw.com

Final Numbers
Data: Census Bureau via FRED, BEA via FRED; Chart: Andrew Witherspoon/Axios

✔️ Thanks for reading Axios Pro Rata! Please ask your friends, colleagues and shaken martini drinkers to sign up.