Sep 11, 2019

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning

Illustration: Sarah Grillo/Axios

WeWork is moving forward with its IPO, as this space has repeatedly predicted, despite recent reports that major investor SoftBank was pushing for a delay.

  • I don't know if SoftBank leaked its resistance. But I do know that lots of people think SoftBank was the source, which might as well be the same thing in terms of future perception among founders and VCs.

It makes little sense for executives within WeWork (i.e., people with stock options) to tell reporters that investors don't want the IPO. It makes even less sense for the bankers. And that leaves SoftBank, which knows it overpaid earlier this year without strong anti-dilution protections.

  • If WeWork doesn't go public, SoftBank needn't write down the value of its investment. Or at least not until after Vision Fund 2 finishes fundraising.
  • SoftBank already is dealing with Uber's public market flop.
  • It has added pressure with WeWork, given the perception that SoftBank pushed an accelerated expansion plan that led to nearly $2 billion in 2018 losses.

The trouble, of course, is that WeWork needs cash. From somewhere.

  • It only gets to access a fully-committed $6 billion credit facility if it raises at least $3 billion in the IPO by year-end.
  • WeWork theoretically could restructure the loan based on a similarly-sized private infusion from SoftBank, but it's unlikely given that Wall Street wouldn't be able to play the trade's other side.
  • SoftBank likely would prefer to be WeWork's bank, maybe even as a structured deal that wouldn't create a public mark (at least not yet).
  • Sure it might be overpaying yet again, but that delta would easily be swallowed up by Vision Fund 2 fees. So why not dish that the IPO is on the road to perdition? Or, if WeWork still persists, create the conditions for road-show failure, so that SoftBank can catch the ashes with a highly-structured pillow?

Late-stage venture capital has always been more about the money than the mission. This may the the starkest and highest-stakes example to date, and is playing out on front-pages instead of in backrooms.


🕒 Apollo Global Management stock hit an all-time high earlier this week, more than eight years after going public.

  • Why it matters: Leon Black has no incentive to explain his relationship to Jeffrey Epstein, so long as investors are willing to give him a free pass.

California's state senate last night passed AB5, a bill that would entitle "gig economy" workers to a minimum wage and other benefits. Now it goes back to the State Assembly for reconciliation and then to the desk of Gov. Gavin Newsome, who already has expressed his support.

  • AB5 has been fiercely opposed by companies like Uber and Lyft, but it could become a more immediate risk factor for Postmates, which reportedly plans to file IPO papers this month.

🎧 Pro Rata Podcast speaks with GOP presidential candidate Joe Walsh about canceled primaries, racist tweets, and why he broke with President Trump. Listen here.

Source: Giphy

Hong Kong Exchanges and Clearing proposed to acquire the London Stock Exchange for around $39 billion, contingent on LSE dropping its $27 billion purchase of financial data company Refinitiv from The Blackstone Group and Thomson Reuters.

  • Why it's the BFD: Both Hong Kong and London are worried about remaining global financial centers, due to the anti-China protests and Brexit. This could either firm up their position (we're now too big to ignore) or obliterate it (we're now twice the risk).
  • Reax: LSE said in a statement that it remains committed to the Refinitiv deal.
  • Bottom line: Even if the LSE is willing to switch up strategies — going for more of an uber-exchange than a Bloomberg terminal rival — it's far from certain that British regulators would sign off.
Venture Capital Deals

Rivian, a Plymouth, Mich.-based electric vehicle startup, raised $350 million from Cox Automotive.

JobTeaser, a Paris-based graduate recruitment platform, raised $55 million in Series C funding. Highland Europe led, and was joined by return backers Alven, Idinvest Partners, Seventure Partners, and Korelya Capital.\

ComplianceQuest, a Tampa, Fla.-based provider of enterprise quality management software, raised $36 million in Series A funding led by Insight Partners.

Cimcon, a Burlington, Mass.-based provider of wireless outdoor lighting management software, raised $33 million in Series C funding and a $10 million revenue-sharing facility. Digital Alpha led, and was joined by return backer Energy Impact Partners.

Canndescent, a Santa Barbara, Calif.-based cannabis cultivator, raised $27.5 million in Series C funding. Green Acre Capital led, and was joined by Carnegie Arch Capital, Senterra, Altitude Investment Management, JW Asset Management and an unidentified Japanese brewer.

Sourced Group, a Canadian IT consultancy focused on cloud transformation for regulated industries, raised C$20 million. Round 13 Capital led, and was joined by Comerica Bank and HSBC.

Strong Roots, a UK-based vegetarian frozen food company, raised $18.3 million from Goode Partners.

Dutchie, a Bend, Ore.-based provider of online order management software for cannabis dispensaries, raised $15 million in Series A funding. Gron Ventures led, and was joined by Casa Verde Capital, Thirty Five Ventures, and Sinai Ventures.

Earnest Research, a New York-based provider of data analytics for measuring the consumer economy, raised $15 million in Series B funding. Pivot Investment Partners led, and was joined by return backers Greycroft, Osage, and Bonfire Ventures.

Numerated, a Boston-based bank sales platform, raised $15 million in Series B funding. Patriot Financial Partners led, and was joined by Venrock, FinTop Capital, and Hyperplane.

WaveOptics, a London-based maker of waveguide displays, raised $13 million in new Series C funding (round total $39m) from Chinese electronics company Goertek.

Caper, maker of an “AI-powered shopping cart,” raised $10 million in Series A funding. Lux Capital led, and was joined by Red Apple Group and seed backers YC, First Round Capital, Hardware Club, Sidekick Fund, and FundersClub.

Voxpopme, a UK-based video feedback and analytics company, raised $9 million in Series A-1 funding led by Origin Ventures.

Hawthorne, a New York-based personalized men’s cologne brand, raised $8 million in Series A funding. Imaginary Ventures led, and was joined by return backers Comcast Ventures, Founder Collective, and Shana Fisher.

Realized, an Austin, Texas-based provider of wealth management solutions for investment properties, raised $6 million in Series A funding. Calibrate Ventures led, and was joined by Rice Park Capital.

Cyware Labs, a New York-based threat intelligence sharing startup, raised $3 million in seed funding led by Emerald Development Managers.

Flatfile, a Denver-based customer data organization startup, raised $2 million in pre-seed funding led by Afore Capital.

Private Equity Deals

🚑 Arcline Investment Management acquired a majority stake in Akron Biotechnology, a Boca Raton, Fla.-based provider of cell culture and cell biology products.

🚑 H.I.G. Capital agreed to buy the contract manufacturing unit of Mallinckrodt (NYSE: MNK) for upwards of $250 million.

The Hilb Group, a Richmond, Va.-based portfolio company of ABRY Partners, acquired The Incentive Group, a Waltham, Mass.-based employee benefits consulting and brokerage firm.

KKR acquired a majority stake in Burning Glass Technologies, a Boston-based provider of labor market data.

Precision Aviation Group, an Atlanta-based portfolio company of GenNx360 Capital Partners, acquired Momentum Services Corp., a provider of repair services for LCD flat panel displays.

Shermco Industries, an Irving, Texas-based portfolio company of Gryphon Investors, acquired NextGen Technologies, a Canadian electrical testing services provider.

Public Offerings

🚲 Peloton Interactive, the connected indoor cycling company, set IPO terms to 40 million shares at $26-$29. It would have a fully-diluted market value of $9 billion, were it to price in the middle, and plans to trade on the Nasdaq (PTON) with Goldman Sachs and J.P. Morgan as lead underwriters. Peloton reports a $195 million net loss on $915 million in revenue for the fiscal year ending June 30, 2019, and raised nearly $1 billion in VC funding from firms like Tiger Global Management, True Ventures, Fidelity, L Catterton, and TCV.

Central Group, a Thai retail conglomerate, is prepping a 2020 IPO that could raise around $2 billion, per Bloomberg.

🚑 Shanghai Henlius, an unprofitable biotech being spun out of Fosun Group, began taking investor orders for what would be Hong Kong's first major IPO since July.

Liquidity Events

Morgan Stanley Capital Partners is considering a sale process for Austin, Texas-based veterinary hospitals operator Pathway Vet Alliance, per PE Hub.

Platinum Equity completed its $400 million sale of the embedded power unit of portfolio company Artesyn Embedded Technologies to Advanced Energy Industries (Nasdaq: AEIS).

More M&A

Grab is in talks to buy a majority stake in DANA, an Indonesian online payments company backed by Ant Financial and Emtek, and then merge it with OVO, in which Grab already owns shares, per Reuters.

Innophos (Nasdaq: IPHS), a Cranbury, N.J.-based food additives maker with a market cap of around $635 million, is seeking a buyer, per Bloomberg.

IWG (LSE: IWG), the parent company of co-working space operators Regus and Spaces, is considering a sale process for its Canadian business, per Bloomberg. Prior reports were that it’s also considering an IPO for its U.S. unit.

Walt Disney Co. (NYSE: DIS) will seek a buyer for FoxNext, the gaming unit it acquired through its purchase of 21st Century Fox’s entertainment assets, per Bloomberg.

Yes Bank, India’s fourth-largest private lender, said it’s nearing a deal to sell a minority equity stake to a global tech company, without disclosing further details.


Link Ventures, a Chicago-based VC firm focused on early-stage consumer Internet companies, raised over $100 million for its second fund.

Lovell Minnick Partners, a mid-market private equity firm focused on financial services, raised $1.28 billion for its fifth fund.

Providence Equity Partners raised $2 billion for its fourth growth equity fund.

It's Personnel

Alex Arfaei joined life sciences-focused VC firm Pappas Capital as a partner. He previously was a managing director with BMO Capital Markets.

The Blackstone Group is promoting private equity COO Vik Sawhney to a new role as the firm’s chief administrative officer and global head of IR and business development.

John Eppler joined Lee Equity Partners as a vice president. He recently received his MBA from Wharton and, before that, was at Northlane Capital.

Mac Lothrop joined Trivest Partners as director of biz dev, per his LinkedIn profile. He previously was with TruSight.

Geneviève Maltais-Boisvert joined Digital Bridge as a principal. She previously was director of infrastructure investments at PSP Investments.

Michael Mithoff joined Americana Partners as a managing director and head of private equity, after having served in a similar role with HighTower Texas.

Angela Sun joined VC firm Alpha Edison as a partner and COO. She previously was with Bloomberg LP as global head of strategy and corporate development.

In Memoriam

Photo by Gary Hershorn/Getty Images

Please take a moment to remember the thousands of innocents murdered 18 years ago this morning.

  • Among the lost were private equity investors David Retik and Chris Mello, both of whom were on Flight 11. The foundation established in their names has since awarded $2 million in grants to over 40 nonprofits.
Dan Primack

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