Aug 27, 2018

Axios Pro Rata

By Dan Primack
Dan Primack

Today we kick off another week of Axios Pro Rata podcasts. Please be sure to subscribe and listen to past episodes, via Apple, Google Play, Spotify or other podcast platforms. Okay, here we go...

Top of the Morning
Illustration: Lazaro Gamio/Axios

When Elon Musk on Friday night ended his Tesla buyout pursuit, it was the most predictable part of this slapdash saga. And, like with some of Musk's earlier moves, it created new questions for securities regulators.

There should no longer be doubt that Musk lied when he claimed to have "funding secured." He's not a naif when it comes to either social media or running a public company, and arguing that he misunderstood Saudi intent is a shaky hill to die on. Particularly when it took him nearly a week to publicly clarify the Saudi conversations, thus letting investor speculation run wild.

Musk's new regulatory problem can be found near the end of his "Staying Public" blog post, which was released late Friday night:

"I met with Tesla’s Board of Directors yesterday and let them know that I believe the better path is for Tesla to remain public. The Board indicated that they agree."

Did you catch that timing? Musk and Tesla's board met on Thursday, but his decision wasn't publicly disclosed until after market close on Friday. We all know Musk is into tunneling, but this was the moment to stop digging.

No one seems to know if the SEC will throw the book at Musk or just slap his wrist. Either way, there will be cultural consequences that go well beyond this situation (yes, more shades of Trump's Twitter habit).

Both Musk and Tesla still have tons of potential liability via shareholder lawsuits, no matter what the SEC does. Not just from the shorts who got squeezed by his original tweet, but also the longs who now being pressured on the other side.

  • Tesla shares opened down more than 2% this morning, or just below $316 per share.
  • They hit an all-time high of $389.61 after Musk's initial take-private tweet, in which he proffered a $420 purchase price.

I recommend you read this tic-toc from WSJ's Liz Hoffman and Tim Higgins, which includes a nugget about how Silver Lake and Volkswagen had both agreed to invest before Musk pulled the plug.

  • It also details how Musk discovered many take-private complications that should have been obvious to him before the initial tweet (or at least ones that would have been explained to him, had he first retained financial advisors), such as how big private shareholders would want a say in company operations, and that certain mutual funds had structural limits on how much they could invest in a privately-held Tesla.

Bottom line: The deal died, but that didn't cure the headaches.

The BFD
Photo by Bill Pugliano/Getty Images

Berkshire Hathaway is in talks to invest upwards of $357 million for between a 3% and 4% stake in the parent company of Paytm, an Indian digital payments company backed by SoftBank and Alibaba, per The Economic Times.

  • Why it's the BFD: It would be Berkshire's first-ever investment in India, and also his first in a privately-held tech company that remains highly unprofitable.
  • Bottom line: "Paytm was valued at around $7 billion last year when it raised $1 billion from SoftBank Vision Fund and around $10 billion earlier this year during a secondary share sale by employees of the company. If the transaction goes through, it will give Paytm more firepower to strengthen its market leadership against Flipkart-owned Phonepe and Google’s Tez, besides potential competition from Facebook-owned WhatsApp and Reliance Jio." — Madhav Chanchani, The Economic Times
Venture Capital Deals

🚑 Paladina Health, a Denver-based chain of primary care clinics, raised $165 million in growth equity funding led by control shareholder NEA, alongside Oak HC/FT, Alta Partners and Greenspring Associates. NEA acquired Paladina earlier this summer from DaVita (NYSE: DVA) for $100 million. http://axios.link/UpRo

🚑 Harbour BioMed, a China and Massachusetts-based drug startup focused on immuno-oncology and inflammation, raised $85 million in Series B funding. GIC led, and was joined by China Life, Vertex Ventures and return backers AdvanTech and Legend Capital. http://axios.link/Ck7M

Evolve Vacation Rental Network, a Denver-based vacation rental management company, raised $80 million. T. Rowe Price led, and was joined by Winslow Capital Management, Foxhaven Asset Management, Arrowmark Partners and return backers Annox Capital, Allen & Co. and PAR Capital Ventures. http://axios.link/lMfa

PebblePost, a New York-based programmatic direct email company, raised $25 million in Series C funding. Advance Venture Partners led, and was joined by RRE, Greycroft and Tribeca Venture Partners. http://axios.link/EuEH

• Sitetracker, a project and asset management platform for infrastructure projects, raised $24 million. Return backer NEA led, and was joined by Wells Fargo Strategic Capital and Salesforce Ventures. www.sitetracker.com

Private Equity Deals

• Blackstone appears to have secured enough shareholder support for it’s $3.2 billion takeover of Investa Office Fund (ASX: IOF), an Australian real estate investment trust, per The Australian.

• KKR is among those circling GoCompare Group (LSE: GOCO), a British insurance comparison company that has a market cap of around £429 million, per Bloomberg. http://axios.link/Tg6c

• BWAY, an Atlanta-based portfolio company of Stone Canyon Industries, completed its previously-announced purchase of Maitland, Fla.-based Industrial Container Services from Centerbridge Partners. http://axios.link/Eozs

• Marlin Equity has acquired Bulk TV, a Raleigh, N.C.-based integrator of enterprise video, data and voice solutions. www.bulktv.com

• Source Code, a Waltham, Mass.-based portfolio company of JMC Capital Partners, acquired certain assets of Silicon Mechanics, a Seattle-based maker of dedicated servers and IT services for developers. www.sourcecode.com

🚑 Verscend Technologies, a Waltham, Mass.-based portfolio company of Veritas Capital, completed its $4.9 billion billion take-private acquisition of Cotiviti, an Atlanta-based provider of payment accuracy and spend management solutions to the healthcare industry. www.verscend.com

Public Offerings

• One company, a SPAC called Longevity Acquisition, is the only IPO expected to price on a U.S. exchange this week. http://axios.link/3LB5

• Arco Platform, a provider of online educational content for private schools in Brazil, filed for a $100 million IPO. It plans to trade on the Nasdaq (ARCE), with Goldman Sachs as lead underwriter. http://axios.link/nZnB

• Bank7, an Oklahoma City-based bank with branches in Texas and Kansas, filed for a $75 million IPO. It plans to trade on the Nasdaq (BSVN), with Keefe Bruyette Woods as lead underwriter. http://axios.link/yDbY

Liquidity Events

🚑 DW Healthcare Partners sold Prime Education, a Fort Lauderdale, Fla.-based medical education and outcomes research company, to Everyday Health, a subsidiary of j2 Global (Nasdaq: JCOM). www.primece.com

• Lone Star Funds is “locked in a stand-off” over price, related to its possible £2 billion sale of London-based residential real estate company Quintain to Delancey Estates, per the FT. http://axios.link/Rc3r

🚑 Wright Medical Group (Nasdaq: WMGI) agreed to buy Cartiva, an Alpharetta, Ga.-based maker of medical devices for treating cartilage injuries and osteoarthritis, for $435 million in cash. Cartiva had raised around $32 million in VC funding from firms like NEA and Windham Venture Partners. www.cartiva.net

More M&A

🍫 Blommer Chocolate Co., a family-owned chocolate and cocoa manufacturer based in Chicago, is considering a sale process that could fetch around $500 million, per Bloomberg. http://axios.link/nGyo

⛽ Enbridge (NYSE: EEP) agreed to buy pipeline master limited partnership Spectra Energy Partners (NYSE: SEP) for a sweetened $3.3 billion. http://axios.link/xFbF

• Noble Group received shareholder approval for a $3.5 billion debt-for-equity swap that leaves shareholders with just 20% of the Singapore-based commodities trader. http://axios.link/ALuo

Fundraising

• Cleo Capital, a new firm created by entrepreneur Sarah Kunst, is seeking $10 million for a debut fund that will provide capital to female entrepreneurs to act as startup scouts, Axios has learned. http://axios.link/rZSj

• Capital Alignment Partners, a Nashville-based private equity firm focused on lower middle markets, raised $118 million of a $150 million-targeted third fund, per an SEC filing. www.capfunds.com

• Vestigo Ventures, a Cambridge, Mass.-based VC firm focused on early-stage fintech companies, closed its debut fund with $59 million. www.vestigoventures.com

It's Personnel

• Kabir Mathur (ex-KKR) has joined Abu Dhabi Investment Authority as head of private equity for India and Southeast Asia. http://axios.link/Ef9m

Final Numbers

More from PitchBook:

  • Club deals for GP stakes are becoming more common.
  • Many buyside newcomers have long histories with LP secondaries.
  • "The PitchBook Platform currently has performance data for more than 250 funds raised by managers who have received a GP stakes investment, with 35% of those vehicles posting top-quartile performance. These GPs also appear adept at mitigating downside risk, with only 19% of funds falling into the bottom quartile."
Dan Primack

Thanks for reading. If this was forwarded to you, please subscribe at GetProRata.axios.com.