Jul 7, 2020

Axios Pro Rata

By Dan Primack
Dan Primack

🎧 Axios Re:Cap, my new daily podcast, focuses on the expanding rift between tech investors and tech media.

Top of the Morning

Illustration: Eniola Odetunde/Axios

The U.S. Treasury Department yesterday morning released the names over 660,000 small businesses that received Paycheck Protection Program loans of at least $150,000, per its recent compromise with Congress.

  • Well, at least that's what we thought Treasury did.

What happened: Within hours, several well-known companies and investment firms on the list denied that they had ever applied for PPP loans, let alone received them.

  • A handful of venture capital firms and funds were listed, but most claimed it was a mistake.
  • For example, Treasury reports that Foundation Capital VIII received between $1 million and $2 million. But Foundation's Dave Anderson says the loan actually was for a Foundation portfolio company.
  • Per an email: "The processing bank confirmed it was a data entry error on their end, and they are working with the SBA to correct the database. They also confirmed that the funds did go to the right company, and not Foundation Capital."
  • Foundation used Silicon Valley Bank, but there were similar alleged issues with plenty of other lenders — suggesting something more systemic.

Then there's e-scooter company Bird, which Treasury reports got a PPP loan of between $5 million and $10 million.

  • Bird claims it began an application with Citi, but ultimately decided against applying. Citi confirmed that it "has not funded a PPP loan for Bird."
  • Treasury has not yet explained how Bird got on the list.
  • Citi says it processed around $3.5 billion in PPP loans.

Be smart: There were over 660,000 companies listed. And reporters only called a tiny percentage of them. If the error rate *we* found is representative of the larger sample, then who knows how many PPP loans there really were, or what companies they went to. Imagine if small businesses got shut out of the initial pool, and then shut down or laid off employees, if the initial pool wasn’t actually exhausted?

  • There’s going to need to be an audit, and not just the promised reviews of companies that got loans north of $2 million.
  • Was this just a bunch of fat fingers? Fraud? Incompetence? A combination of all three?

The bottom line: The purpose of these PPP disclosures was to better understand how the program worked, particularly ahead of a phase 4 stimulus. What we've learned is that we need even more disclosures.

The BFD

Illustration: Rebecca Zisser/Axios

Sina Corp. (Nasdaq: SINA), parent company of Chinese social media platform Weibo (Nasdaq: WB), received a $2.68 billion takeover offer led by company chairman and CEO Charles Chao.

  • Why it's the BFD: This comes in the context of the White House talking about strengthening rules on foreign tech companies listed on U.S. exchanges, and a new threat from Secretary of State Pompeo to ban Chinese social media apps like TikTok from operating in the United States.
  • Details: The offer, officially made by a holding company called New Wave, is for $41 per Sina Corp. share in cash, which would represent a 12% premium over last Thursday's closing price. New Wave already holds a 13% stake in Sina Corp., which has a 45% equity stake and 71% voting rights stake in Weibo.
  • The bottom line: "The interest in Chinese take-private deals has been rising following tensions between China and the United States, with several companies considering whether to keep a New York listing or move instead to Shanghai, Shenzhen or Hong Kong." ⁠— Ayanti Bera, Reuters
Venture Capital Deals

OwnBackup, an Englewood, N.J.-based backup and disaster recovery system for Salesforce clients, raised $50 million. Insight Partners led, and was joined by Salesforce Ventures and Vertex Ventures. http://axios.link/dd5w

🚑 Nine Square Therapeutics, a San Francisco-based biotech focused on movement disorders, raised $50 million in Series A funding from Apple Tree Partners. http://axios.link/HBLN

Basemark, a Finland-based provider of real-time graphics software for autonomous vehicles, raised €7 million led by ETF Partners. http://axios.link/46a2

Optimal Dynamics, a Princeton, N.J.-based AI startup focused on logistics and supply chains, raised $4 million in seed funding. Fusion Fund led, and was joined by The Westly Group, TenOneTen Ventures, Embark Ventures, FitzGate Ventures, and Newark Venture Partners. www.optimaldynamics.com

CALA, a New York-based managed marketplace for launching fashion brands, raised $3 million co-led by Real Ventures and Maersk Growth. www.ca.la

Private Equity Deals

🚑 Abry Partners acquired a majority stake in HealthEZ, a Minneapolis-based third-party administrator of self-funded medical plans. www.healthez.com

American Construction Services, a portfolio company of Angeles Equity and Clearlake Capital Group, acquired Redding, Calif.-based Weaver Lumber. www.weaver-lumber.com

CI Capital Partners launched an acquisition platform focused on the residential solar and commercial security industries, led by ex-Sunrun president and COO Paul Winnowski. cicapllc.com

Fresh Direct Produce, an Indianapolis-based portfolio company of HKW, acquired Mike and Mike’s, a Canadian non-grower distributor of organic fruits and vegetables. www.freshdirectproduce.com

Intermediate Capital Group abandoned its efforts to buy Australia’s Infigen Energy (ASX: IFN) after proving unable to find adequate financing, per The Australian. www.infigenenergy.com

Platinum Equity acquired L&R Distributors, a Brooklyn-based wholesale of consumer products. www.lrdist.com

Thoma Bravo completed its acquisition of Exostar, a Herndon, Va.-based information-sharing platform for highly regulated industries. Sellers included Merck Global Health Innovation Fund. http://axios.link/z4l1

Public Offerings

🚑 AlloVir, a Cambridge, Mass.-based developer of T cell therapies for viral diseases, filed for a $100 million IPO. It plans to list on the Nasdaq (ALVR), and raised $154 million in VC funding from firms like Fidelity, Gilead Sciences, Invus Group, Samsara BioCapital, F2 Ventures, EcoR1 Capital, Redmile Group, and SVB Leerink. http://axios.link/9Zri

🚑 Inventiva, a French biotech focused on NASH, set terms for its Nasdaq (IVA) listing to 7.5 million shares at $13.68 (converted from last close on Euronext Paris). Shareholders include BVF Partners (22.4% pre-listing stake), NEA (13.4%), Novo Holdings (8%), and Sofinnova Partners (7.2%). http://axios.link/5iEY

nCino, a Wilmington, N.C.-based digital banking startup, set IPO terms to 7.6 million shares at $22-$24. It would have a fully diluted market value of $2.2 billion, were it to price in the middle, and plans to list on the Nasdaq (NCNO). The company raised just over $200 million in VC funding from Insight Partners (46.6% pre-IPO stake), Salesforce (13.2%), Wellington Management (9.5%), T. Rowe Price, and Bessemer Venture Partners. http://axios.link/KNqI

Palantir, a Palo Alto-based big data analytics company, said it has filed confidential IPO papers. It recently announced $500 million in new funding, although an SEC filing suggests it may add hundreds of millions more. http://axios.link/CgJo

Liquidity Events

☀️ Sunrun (Nasdaq: RUN), the largest U.S. home solar provider, agreed to buy rival Vivint Solar (NYSE: VSLR) for $3.2 billion in stock. The Blackstone Group holds around a 60% stake in Vivint. http://axios.link/QmcT

More M&A

AMS of Austria received EU antitrust approval for its €4.6 billion takeover of listed German automotive lighting company Osram. http://axios.link/CWG0

🎮 Microsoft (Nasdaq: MSFT) expressed interest in buying Interactive Entertainment, the gaming unit of Warner Brothers whose titles include “Mortal Kombat,” per The Information. http://axios.link/HKdb

Unacademy, an Indian online learning company, acquired rival PrepLadder for $50 million in cash and stock. Unacademy has raised over $170 million from firms like Facebook and General Atlantic. http://axios.link/CXQy

Vairo Energy agreed to acquire British oil and gas company RockRose Energy (LSE: RRE) for £248 million. http://axios.link/x0tH

Fundraising

Apollo Global Management launched a $12 billion direct lending platform for large companies, with Mubadala Investment Co. as lead backer. http://axios.link/hHlj

Charlesbank Capital Partners raised more than $700 million for its second credit opportunities fund. www.charlesbank.com

Cove Hill Partners, a Boston-based private equity firm focused on consumer and tech companies, raised $1.5 billion for its second fund, per Buyouts. http://axios.link/1GWs

GSO Capital Partners, the credit unit of Blackstone Group, is seeking $7.5 billion for its fourth subordinated debt fund. http://axios.link/9k6M

• K Fund, a Spanish VC firm, raised €70 million for its second fund. http://axios.link/Gs0d

• Victress Capital, focused on consumer startups with at least one female founder, raised $22 million for its second fund. http://axios.link/gFLx

It's Personnel

Dan Daniel, former EVP at Danaher Corp., joined KKR as an operating partner focused on industrial companies. http://axios.link/f0ef

TSG Consumer Partners promoted Girish Satya to principal of portfolio operation. www.tsgconsumer.com

Final Numbers
Data: Federal Reserve; Chart: Axios Visuals

Go deeper: Consensus grows over Fed impact on stocks

Dan Primack

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