Sep 26, 2018

Axios Pro Rata

Dan Primack

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Top of the Morning
Source: Giphy

Airbnb made headlines last week for sending a comment letter to the SEC, asking it to allow the home-sharing company to give equity to its hosts.

Why it matters: The number of gig economy workers continues to rise, but monthly payments have been on a lumpy decline path, according to a new JPMorgan study. This could become an attractive new benefit.

  • Uber spoke with the SEC several years ago about giving its drivers equity, but the ride-hail company gave up after being told it would be illegal under current law.
  • The big difference today is at the top of the SEC, with a new chairman who is very interested in democratizing access to startup equity.
  • Most of that's been focused on finding ways for non-accredited retail investors to invest in startups, but it also could be accomplished by letting millions of gig economy workers get stock in their "employers."

It won't happen overnight. The SEC comment period officially closed this past Monday, but I hear that some gig economy companies are still working on comment letters that they'll just submit late. Then the SEC must review the letters, possibly issue a new rule and likely then open up yet another comment period. Then it would set an effective date, assuming it can make the change without needing corresponding legislation.

All of that might come too late for ride-hail giants Lyft and Uber, both of which plan to go public in 2018 (related: Reuters reports Lyft is talking to JPMorgan to lead its IPO). Once public, these companies could simply give stock to their drivers, kind of like T-Mobile once gave it to certain customers.

  • Airbnb, on the other hand, remains without a CFO and without any immediate IPO ambitions.
  • And there are plenty of other gig economy companies to which this could apply, and for whom offering shares could become an important new recruiting tool.

On the docket: Buyout giant Apollo is in the midst of a contentious legal battle with former partner Imran Siddiqui, who the firm claims violated his non-compete agreement by forming a new private equity firm called Caldera.

  • Caldera is focused on the life insurance sector, and was co-founded by Siddiqui and Stephen Cernich — a former exec with Athene, a life insurance platform Apollo formed in 2009 (it later went public, but Apollo retains a 22% stake and ongoing advisory arrangement).
  • Among the pending issues is that Apollo wants to block Caldera's first prospective purchase.
  • Newly-disclosed documents in the case include Siddiqui's allegations that Apollo charged an inappropriate amount of fees to Athene (including a whopping $409 million last year).
  • Go deeper with the FT's Mark Vandevelde and Sujeet Indap.

Pro Rata Podcast: Our new episode focuses on the Instagram co-founders quitting Facebook, and I'm joined by Axios' Ina Fried. Listen here.

The BFD
Source: Giphy

WeddingWire, a Chevy Chase, Md.-based portfolio company of Permira and Spectrum Equity Investors, agreed to buy XO Group (NYSE: XOXO), owner of TheKnot.com, for $933 million, or $35 per share (27% premium to Monday’s close).

  • Why it's the BFD: Because there reportedly were around 2.2 million weddings in the US last year with a total spend of over $56 billion.
  • Bottom line: "Both brands will be operated as separate consumer products so that wedding professionals and their partners can have both offerings, XO Group said Tuesday. XO Group Chief Executive Mike Steib and WeddingWire CEO Tim Chi will also become co-CEOs of the combined company upon the deal’s completion." — Kimberly Chin, WSJ
Venture Capital Deals

🚑 Morphic Therapeutic, a Waltham, Mass.-based developer of oral integrin-based drugs, raised $80 million in Series B funding. Omega Funds and Novo Holdings co-led, and were joined by Invus and EcoR1 Capital. http://axios.link/X6tb

• Forter, a New York-based provider of e-commerce fraud prevention solutions, raised $50 million in Series D funding. March Capital led, and was joined by Salesforce Ventures and return backers Sequoia Capital, NEA and Scale Venture Partners. http://axios.link/yFV0

🚑 Ceribell, a Mountain View, Calif.-based developer of a rapid response EEG system, raised $35 million in Series B funding. Optimas Capital Partners and The Rise Fund co-led, and were joined by UCB and LivaNova. http://axios.link/7mIf

Instana, a Redwood City, Calif.-based application performance monitoring startup focused on containerized services, raised $30 million in Series C funding. Meritech Capital Partners led, and was joined by return backer Accel. http://axios.link/wxw8

🚑 Maven, a New York-based digital health information and benefits platform for women, raised $27 million in Series B funding. Sequoia Capital and Oak HC/FT co-led, and were joined by Spring Mountain Group, 14W and Female Founders Fund. http://axios.link/Rs08

• Rylo, a San Francisco-based maker of a cinematic video camera, raised $20 million in what could be a $25 million round, per an SEC filing. Listed investors include Icon Ventures and return backer Accel. www.rylo.com

• Jellysmack, a New York-based digital video creation and distribution startup, raised $14 million in Series A funding. Highland Europe led, and was joined by Interplay Ventures, Partech and OneragTime. www.jellysmack.com

• Data.world, an Austin, Texas-based collaborative data resource platform, raised $12 million in Series C funding. Workday Ventures led, and was joined by The AP and OurCrowd. http://axios.link/M2pB

🚑 Holmusk, a Singapore-based data analytics platform focused on chronic diseases and behavioral health disorders, raised $9.75 million led by Heritas Venture Fund. http://axios.link/EETV

• Concirrus, a London-based provider of marine and auto insurance analytics, raised £5 million co-led by IQ Capital and Eos Venture Partners. www.concirrus.com

• Chunmi Electronics Technology, a Xiaomi-backed Chinese maker of rice cookers, raised “tens of millions” of dollars in Series C funding led by Nokia Growth Partners. http://axios.link/VVFv

Private Equity Deals

AMTdirect, a lease administration software company backed by Luminate Capital Partners, acquired NETfacilities, a Long Beach, Calif.-based provider of facilities management software. www.amtdirect.com

Blackstone and Carlyle have expressed interest in Nielsen Holdings (NYSE: NLSN), the consumer data company under pressure from activist investor Elliott Management, per Bloomberg. http://axios.link/TODH

🚑 Bristol Hospice, a Salt Lake City-based portfolio company of Webster Capital, acquired Suncrest, a for-profit hospice provider with four Colorado locations. www.bristolhospice.com

ICP Group, an Andover, Mass.-based portfolio company of Audax Private Equity, acquired Signature Sports Flooring, a Flower Mound, Texas-based maker of synthetic and hardwood sports flooring systems. The seller is Signature Systems Group, a portfolio company of Linsalata Capital Partners. www.icpgroup.com

🚑 KKR acquired HeTian, a Chinese hospital management company that will become part of a new KKR platform called SinoCare. www.kkr.com

Meridian Adhesives Group, a New York-based portfolio company of Arsenal Capital Partners, acquired W.F. Taylor, a Dalton, Ga.-based specialty flooring adhesives and sealants manufacturer, from Dominus Capital. www.wftaylor.com

Public Offerings

🚑 Entasis Therapeutics, a Waltham, Mass.-based developer of anti-infective products, raised $75 million in its IPO. The pre-revenue company priced 5 million shares at $15, versus original plans to offer 4.4 million shares at $16-$18, and has a fully-diluted market value of $208 million. set IPO terms to 4.4 million shares at $16-$18. It had raised around $82 million from AstraZeneca (21.6% pre-IPO stake), Clarus Ventures (14.7%), Novo (13.7%), Frazier Life Sciences (12.2%), Pivotal BioVenture Partners (10.9%), Sofinnova Ventures (10.9%), TPG Biotech (10.9%) and Eventide Funds (6.1%). www.entasistx.com

🚑 LogicBio, a Cambridge, Mass.-based gene editing company focused on rare diseases, filed for an $86 million IPO. It plans to trade on the Nasdaq (LOGC) with Jefferies as lead underwriter, and raised around $50 million from firms like OrbiMed (35.33% stake), Arix Bioscience (15.26%) and Pontifax (9.15%). www.logicbio.com

SurveyMonkey, a San Mateo, Calif.-based maker of online survey software, raised $180 million in its IPO. The company priced 15 million shares at $12, versus original plans to price 13.5 million shares at $9-$11. Salesforce also plans to buy another $40 million of stock in a private placement, and the IPO gives SurveyMonkey a fully-diluted market value of $1.6 billion. It will trade on the Nasdaq (SVMK), while J.P. Morgan was lead underwriter. The company reports a net loss of $27 million on $121 million in revenue for the first half of 2018 and that its largest shareholder is Tiger Global, with a 29.3% pre-IPO stake.

Liquidity Events

🚑 Alexion Pharmaceuticals (Nasdaq: ALXN) agreed to buy Syntimmune, a Boston-based developer of FcRn drugs, for upwards of $1.2 billion (including $400m upfront). Syntimmune had raised from firms like Apple Tree Partners and Baxalta Ventures. http://axios.link/g1Zy

BC Partners and Carlyle hired Morgan Stanley to find a buyer for Accudyne Industries, a Dallas-based maker of valves and pumps that they could for $3.5 billion in 2012, per the FT. http://axios.link/hAKa

Carlyle and Pictet are seeking to sell Athena Art Finance, a New York-based art financing group they co-founded in 2015, per Bloomberg. http://axios.link/V6y4

OpenGate Capital agreed to sell NAKAN, a French PVC compounding company, to Westlake Chemical (NYSE: WLK) for $265 million. http://axios.link/DtoI

More M&A

BBG, a Dallas-based national commercial real estate valuation and advisory firm, acquired Austin, Texas-based rival HCP Advisors. www.bbgres.com

Yildiz Holdings, the Turkish owner of Godiva chocolate, is considering a sale of its Japanese Godiva business, which could fetch around $1.5 billion, per Reuters. http://axios.link/1btP

Fundraising

Energize Ventures raised $150 million for its new VC fund focused on the energy tech sector. The firm previously was known as Invenergy Future Fund, but tells Axios that it didn't want to be incorrectly viewed as a captive corporate fund. http://axios.link/JqV6

It's Personnel

Anthony Dell, former chief compliance officer for Ares Management, has become CCO for venture capital firm General Catalyst, per his LinkedIn page.

Fan Hua stepped down as head of asset allocation at China Investment Corp., per Bloomberg. http://axios.link/NtQu

Scott Kirk, former COO and CFO of High Ridge Brands, joined consumer-focused private equity firm Yellow Wood Partners as an operating partner. www.yellowwoodpartners.com

Final Numbers: M&A activity
Source: Thomson Reuters Deals Intelligence
Dan Primack