Jun 25, 2019

Axios Pro Rata

By Dan Primack
Dan Primack

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Top of the Morning
Source: Giphy

When Slack went public last week via a direct listing, it got the benefits of algorithmic market pricing, speed and lower fees. But it didn't raise any capital for what remains a money-burning enterprise, as it would have via a traditional IPO, nor did it get to pick its new investors.

  • The question, therefore, is if IPO and direct listing structures could be combined so as to receive the best of both floats.
  • The answer is yes. Probably.

Slack drafted behind a legal framework developed last year by Spotify and securities regulators.

Two of its primary features were that a direct listing couldn't include underwriting (i.e., no intermediaries that sell or forecast, nor pricing stabilization) and that its registration statement needn't include bona fide pricing estimates before being made effective by the SEC.

  • There's also been discussion of how direct listings enabled both Spotify and Slack to (mostly) eliminate lockups, but that's correlation without causation. We're seeing more flexible lockups structures in traditional listings and a company could theoretically IPO without any lockups (if it could get underwriter approval).

To create a hybrid structure, an issuer would borrow from the Spotify precedent and add in elements of the modified Dutch auction process that Google used to go public in 2004 (which was viewed dimly at the time, thus discouraging copycats, but which worked in retrospect).

  • It wouldn't be as clean as a direct listing in that it would move a bit slower with more Wall Street involvement.
  • It would differ from what Google did in that it would provide 100% insider liquidity and not use a preliminary price range.
  • But it would solve the "price guess" dilemma, provide liquidity and give some greater control over the public investor base — all while also adding cash to corporate coffers. And, again, lockups shouldn't be an issue.

The highest hurdle, banking sources tell me, would be finding a company that wants to do it.

There's still a belief that direct listings will only work with a "household name" issuer (yes, Slack counted), and that's a limited universe. Then narrow it even further, as most companies don't want the hassle of working out all the complications with SEC officials (that price range issue would be thorny).

  • Airbnb makes all sorts of sense for its anticipated offering, which we now hear is more likely in Q1 2020 than in Q4 2019, but it's unclear if CFO Dave Stephenson has the same HBS case study ambitions as Spotify's Barry McCarthy.

The bottom line: Just because it could be done doesn't mean it will be done, as VC-backed "unicorn" disruption rarely extends to their own securities.


Illustration: Aïda Amer/Axios

AbbVie (NYSE: ABBV) agreed to buy Botox maker Allergan (NYSE: AGN) for around $63 billion in cash and stock, which works out to $188.24 per Allergan share (45% premium to yesterday's closing price).

  • Why it's the BFD: The pharma industry isn't just undergoing consolidation, but mega-consolidation. And with that comes regulatory scrutiny, even if there isn't too much product overlap. Just yesterday, Bristol-Myers Squibb said it would divest a popular psoriasis drug made by Celgene, in order to get FTC approval for that $74 billion merger.
  • History: Allergan is a company built via M&A that also was arguably felled by M&A, when Pfizer walked away from a $160 billion corporate inversion in 2016.
  • Bottom line: "A combined AbbVie and Allergan — both of which have engaged in controversial patent tactics to protect moats around their blockbuster drugs — would be one of the world's largest pharma companies. It's betting that Allergan's Botox and other beauty and eye drugs will ease the transition as AbbVie's Humira loses U.S. patent protection in 2023." — Bob Herman, Axios
Venture Capital Deals

Monzo, a British challenger bank, raised £113 million in Series F funding at a £2 billion post-money valuation. YC Continuity led, and was joined by Latitude and return backers General Catalyst, Stripe, Passion Capital, Thrive Capital, Goodwater Capital, Accel and Orange Digital Ventures. http://axios.link/281W

Showpad, a Chicago-based provider of sales enablement software, raised $70 million in Series D equity and debt funding. Dawn Capital and Insight Partners co-led the equity tranche, with Korelya Capital and insider Hummingbird Ventures also participating. SVB provided the debt. http://axios.link/EIno

Cameo, a Chicago-based startup that lets fans pay for personalized videos from celebrities, today announced a $50 million Series B round led by Kleiner Perkins. Axios had previously reported on the deal, which comes at around a $300 million valuation.

Venn, an Israel-based neighborhood management startup, raised $40 million in Series A funding from Pitango Venture Capital, New York State Common Retirement Fund and Bridges Israel. www.venn.city

Button, a New York-based mobile commerce platform, raised $30 million in Series C funding. Icon Ventures led, and was joined by Capital One Ventures and return backers Redpoint Ventures, Norwest Venture Partners and DCM. www.usebutton.com

Open, an Indian provider of business finance automation solutions, raised $30 million in Series B funding. Tiger Global led, and was joined by Tanglin Venture Partners Advisors and return backers 3one4 Capital, Speedinvest and BetterCapital AngelList Syndicate. http://axios.link/w2fY

BrightWay Vision, an Elbit Systems (Nasdaq: ESLT) subsidiary that provides sensing and laser illumination tech for cars, raised $25 million from Koito Manufacturing (Tokyo: 7276) and Magenta Venture Partners. http://axios.link/g8Vj

KoinWorks, an Indonesian P2P lending platforms for SMEs, raised $12 million in Series B funding co-led by EV Growth and Quona Capital. http://axios.link/ydOA

Tundra, a zero-commission wholesale marketplace, raised $12 million in Series A funding led by Redpoint Ventures. www.tundra.com

Motorway, a British used car marketplace, raised £11 million in Series A funding led by Marchmont Ventures. http://axios.link/Dhs3

Phlur, an Austin, Texas-based fragrance startup, raised $7 million in Series A funding. Symrise led, and was joined by Belcorp and Next Coast Ventures. Phlur also said it has acquired Texas Beauty Labs. http://axios.link/33P6

Private Equity Deals

Italian banks have rejected Apollo Global Management’s rescue plan for troubled lender Banca Carige, per Reuters. http://axios.link/JY7o

Lightyear Capital agreed to buy Lendmark Financial Services, a Lawrenceville, Ga.-based consumer finance company, from The Blackstone Group for around $600 million (excluding debt), per Reuters. http://axios.link/WkTW

Swander Pace Capital led an acquisition of Bragg, a Santa Barbara, Calif.-based maker of apple cider vinegar. Other participating investors include Dragoneer, Katy Perry and Orlando Bloom. www.bragg.com

🚑 Water’s Edge Dermatology,, a West Palm Beach-based portfolio company of Gryphon Investors, acquired a control stake in Jupiter, Fla.-based plastic surgery practice Aqua Plastic Surgery.

WorkForce Software, a Livonia, Mich.-based provider of workforce management software, raised a “significant equity investment” from an affiliate of Elliott Management. The deal gives Elliott an equal stake with Insight Partners, which previously was WorkForce’s majority owner. www.workforcesoftware.com

Public Offerings

Afya, a Brazilian for-profit medical education company, filed for a $100 million IPO. It plans to list on the Nasdaq (AFYA) with Morgan Stanley as lead underwriter, and reports $417 million in revenue for the year ending March 31, 2019. http://axios.link/17sw

AssetMark Financial, a Concord, Calif.-based wealth management platform filed for a $100 million IPO. It plans to list on the NYSE (AMK) with JPMorgan as lead underwriter, and reports $99 million of net income on $296 million in revenue for 2018. Backers include China’s Huatai International. http://axios.link/0wAR

Miniso, a Chinese budget household goods retailer, is prepping an IPO that could raise around $1 billion in either Hong Kong or the U.S., per Bloomberg. Last year the company raised around $145 million from Tencent and Hillhouse Capital Group. http://axios.link/8SCI

Liquidity Events

🚽 Adco, a German porta potty company, is on the block for between €700 million and €800 million, per Reuters. Its current owners are Apax Partners, EQT Partners, Core Equity Holdings and Triton. http://axios.link/KzqZ

LiveRamp (NYSE: RAMP) acquired Data Plus Math, a Boston-based platform for buying, selling and analyzing online video. Data Plus Math raised over $7 million from firms like Comcast Ventures and Greycroft. http://axios.link/oFz3

WP Engine, an Austin, Texas-based provider of WordPress hosting services acquired smaller rival Flywheel. WP Engine last year raised $250 million from Silver Lake, while Omaha-based Flywheel had raised around $14 million from firms like Five Elms Capital. http://axios.link/Lc95

More M&A

Alleghany Corp. (NYSE: Y) agreed to buy Coastal Industrial Distributors, a Saco, Maine-based maker of solid carbide end mills. www.cidtools.com

Capgemini (Paris: CAP) agreed to buy French engineering consultancy Altran Technologies (Paris: ALT) for €3.6 billion. http://axios.link/gzGB

Celsius Network, a New York-based cryptocurrency lending platform, acquired BSave, a London-based startup for earning interest income on cryptocurrencies. http://axios.link/ImOs

🚑 Conatus Pharmaceuticals (Nasdaq: CNAT) said it will explore strategic alternatives after its liver disease drug failed in clinical trials. The San Diego-based company’s market cap has fallen to $30 million. http://axios.link/543s

FWD Group is in talks to buy MetLife’s (NYSE: MET) Hong King insurance unit for under $400 million, per Bloomberg. http://axios.link/Qv97

Lions Gate Entertainment (NYSE: LGF), the movie studio behind John Wick and The Hunger Games, is “ready to talk” about being acquired, per Bloomberg. Its stock price has fallen 55% over the past year, giving it a current market cap of around $2.4 billion. http://axios.link/PHZh

Occidental Petroleum (NYSE: OXY) is seeking a buyer for a majority stake in Western Midstream Partners, a pipeline operator it would acquire through its $38 billion purchase of Anadarko Petroleum (NYSE: APC), per Bloomberg. http://axios.link/uaF1

SMCP (Paris: SMCP) agreed to buy De Fursac, a France-based men’s luxury clothing brand. http://axios.link/L6a3

Stern Stewart & Co., a German consultancy, said its investment arm acquired the Siteco luminaires unit of German lighting group Osram. http://axios.link/DsGU

Walt Disney Co. (NYSE: DIS) is in talks to invest upwards of $200 million into Indonesian media company MNC, per Reuters. http://axios.link/MmCw


Actera Partners, a Turkey-focused private equity firm, is raising $1.25 billion for its third fund, per an SEC filing.

Hahn & Co., a private equity firm focused on South Korea, is raising $2.5 billion for its third fund, per a public pension document. http://axios.link/9WdD

🚑 Vesalius Biocapital, a Luxembourg-based life sciences VC firm, raised €120 million for its third fund. www.vesaliusbiocapital-3.com

XVC, a Chinese venture capital firm, is raising $265 million for its second fund, per an SEC filing.

It's Personnel

Brian Allen joined Willett Advisors, which manages Mike Bloomberg’s personal wealth, as director of private equity. He previously was a managing director with Soros Private Equity.

Altus Capital Partners promoted Nick deMarco to principal and Joshua Tesoriero to VP. www.altuscapitalpartners.com

Final Numbers
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Data: CoinDesk; Chart: Harry Stevens/Axios
Dan Primack

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