Nov 15, 2018

Axios Pro Rata

By Dan Primack
Dan Primack

📺 The next two episodes of "Axios on HBO" will include interviews with Tim Cook, Elon Musk and Bill Gates. Plus some screen-time for yours truly. Sundays at 6:30 and again at 11:30 p.m ET/PT.

Top of the Morning

Illustration: Lazaro Gamio/Axios

Uber still plans to go public in 2019, but its bottom line is moving in the wrong direction.

  • The company yesterday reported a third quarter loss of $1.07 billion, which is 13% larger than what it reported in Q2.
  • Axios' Kia Kokalitcheva reports that the company blames the higher net loss on increased spending in "competitive markets" like the U.S., India and the Middle East, plus new initiatives like bikes and scooters.
  • There was a 24% quarter-over-quarter improvement if looking at the loss from the perspective of adjusted EBITDA, which is Uber's preferred metric, but that's not the market standard and a $527 million loss on that basis remains fairly formidable.
  • Moreover, while the GAAP loss actually shrunk year-over-year, the adjusted EBITDA loss grew.
  • Q3 revenue came in at $2.95 billion, up 5% from Q2 and 38% from Q3 2017.

Bottom line: Dara Khosrowshahi and his new finance team still have time to stem the red tide before passing around an S-1, but they're beginning to cut it awful close.

Some updates to recent stories:

  • Josh Harder, who left Bessemer Venture Partners to run for Congress against incumbent GOP Rep. Jeff Denham (CA-10), came from behind to win election. Denham formally conceded yesterday.
  • Dell raised the cash component of its takeover bid for VMWare's tracking stock, from $108 per share to $120 per share. It increases the aggregate deal value by $2.2 billion, and has gotten support pledges from shareholders Cox, Elliott Management, Canyon Partners and Mason Capital (which, combined, control around 17% of the tracking stock). No word yet from Carl Icahn or P. Schoenfeld Asset Management, who were both opposed to the original offer.
  • The FDA today will formally unveil its new e-cigarette rules, including the bans on many flavored pods from generalist retailers. It's also proposing a retail ban on menthol cigarettes, which I'd assume would also extend to menthol-flavored vaping pods (menthol, mint and tobacco-flavors will still be permitted, as will online sales and smoke-shop sales of fruit-flavored pods). Axios' Caitlin Owens has more.

🎧 Podcast: I talk with NYC Deputy Mayor Alicia Glen, an architect of the Amazon HQ2 deal in Long Island City, about the controversial incentives, the last-minute asks and how New York will ultimately gauge success. Listen via Apple or via Axios.

  • Speaking of Amazon, yesterday's lead item neglected to mention that there is indeed a Seattle-based "unicorn" founded by an ex-Amazon employee: On-demand shipping platform Convoy.
Source: Giphy

Levi Strauss & Co. is prepping an IPO that could raise between $600 million and $800 million at a valuation of around $5 billion (or perhaps $5.01 billion?), according to CNBC.

  • Why it's the BFD: Because there aren't too many 100 year-old companies around, let alone 145-year old companies that remain iconic and successful. Plus, Levi's isn't only a fashion trailblazer. It also completed one of the largest-ever IPOs at the time of issuance ($50m in 1971) and a then-massive take-private leveraged buyout ($1.7 billion in 1984).
  • Bottom line: "After profit declines in recent years, Levi's is seeing its top and bottom lines rise once again. on Oct. 9, Levi's reported revenue of $1.4 billion for the quarter ended Aug. 26, a 10% increase from the same quarter a year ago. Net income was $130 million, representing a jump of 45%. During 2017, Levi's posted revenue of nearly $5 billion. The company has also cut its debt load in half over the last two years." — Leslie Picker, CNBC
Venture Capital Deals

Xinchao Media, a Chinese in-elevator digital ad company, raised $300 million led by Baidu.

ServiceTitan, a Glendale, Calif.-based software platform for home services businesses, raised $165 million in Series D funding. Index Ventures led, and was joined by Dragoneer, T. Rowe Price and return backers Battery Ventures, Bessemer Venture Partners and Iconiq Capital.

Airtable, a San Francisco-based coding platform for non-techies, raised $152 million in Series C funding at a $1.1 billion valuation from Thrive Capital, Benchmark, Coatue Management, CRV and Caffeinated Capital.

🚑 NextCure, a Beltsville, Md.-based immunotherapeutics company, raised $93 million in Series B funding. Hillhouse Capital Management and Quan Capital co-led, and were joined by Eli Lilly, Bay City Capital, Surveyor Capital, Ping An Ventures, Taiho Ventures, ArrowMark Partners, NS Investment and return backers Canaan Partners, OrbiMed Advisors, Pfizer, Sofinnova Ventures and Alexandria Venture Investments.

Habana Labs, an AI processor startup with offices in Israel and San Jose, Calif., raised $75 million in Series B funding. Intel Capital led, and was joined by WRV Capital, Bessemer Venture Partners and Battery Ventures.

🚑 Cadent Therapeutics, a Cambridge, Mass.-based drug startup focused on psychiatric diseases, raised $40 million in Series B funding. Cowen Healthcare Investments and Atlas Venture co-led, and were joined by Qiming Venture Partners, Access Industries, Clal Biotechnology Industries and Novartis Institutes for Biomedical Research.

Dia & Co., an online “plus size” apparel subscription service for women,” raised $40 million in Series C funding led by Union Square Ventures.

Primer, a San Francisco-based AI platform for analyzing large datasets, raised $40 million in Series B funding. Lux Capital led, and was joined by Section 32, Mubadala and return backers Amplify Ventures, DCVC and In-Q-Tel.

Standard Cognition, a San Francisco-based developer of autonomous checkout technologies, raised $40 million in Series A funding. Initialized Capital led, and was joined by YC and CRV.

Dragos, a Hanover, Md.-based threat detection and response platform, raised $37 million in Series B funding. Canaan Partners led, and was joined by return backers Emerson, National Grid Partners and Schweitzer Engineering Laboratories.

Airspace Technologies, a Carlsbad, Calif.-based provider of shipping logistics, raised $20 million in Series B funding. Scale Venture Partners led, and was joined by return backer Qualcomm Ventures.

Pirate Studios, a UK-based operator of fully-automated 24 hour music studios, raised $20 million led by Talis Capitral.

KuCoin, a Singapore-based crypto exchange, raised $20 million from IDG Capital, Matrix Partners and Chinese crypto group Neo.

iBanFirst, a French corporate currency conversion company, raised $17 million from Serena Capital, Breega Capital and Xavier Niel.

Italic, a direct-from factory retailer of brandless luxury goods, raised $13 million from Comcast Ventures, Global Founders Capital, Index Ventures and Ludlow Ventures.

D1g1t, a Toronto-based wealth management platform, raised C$9 million in Series A funding. Purpose Financial led, and was joined by Extreme Venture Partners and Portag3.

Building Intelligence, a New York-based provider of visitor management software for building managers, raised $4.1 million in Series A funding led by Founders Equity.

TBM Co., a Japanese developer of technology that makes paper out of limestone, received a new equity investment from Goldman Sachs, per Bloomberg.

Private Equity Deals

Audax Private Equity acquired a control stake in Colony Hardware, an Orange, Conn.-based distributor of contractor supplies, from Tailwind Capital (which retains a minority stake).

Flat Creek Resources, a new energy E&P focused on the Permian Basin, secured a $400 million equity commitment from EnCap Investments.

🐝 Grey Mountain Partners sponsored a management buyout of Mann Lake, a Hackensack, Minn.-based maker of beekeeping products.

H.I.G. Capital sold Constructive Media, a New York-based maker of online math games, to Sandbox & Co.

🚑 Navis Capital agreed to buy Australian medical device company Device Technologies for just over A$700 million, per the Australian Financial Review.

Vestar Capital Partners agreed to acquire a stake in Information Resources, a Chicago-based provider of data and predictive analytics software for consumer goods makers, from New Mountain Capital (which retains a position).

Liquidity Events

The Blackstone Group agreed to sell Australian chemicals company IXOM to Singapore-listed Keppel Infrastructure Trust, for A$777 million.

More M&A

Beyoncé Knowles has acquired the stake she didn’t already hold in the Ivy Park apparel brand she launched two years ago with UK retail executive Philip Green.

CJ CheilJedang of South Korea has acquired Schwan’s, a Marshall, Minn.-based frozen food company, for $1.84 billion.

Dan Gilbert agreed to sell the Greektown Casino-Hotel in Detroit for $1 billion to VICI Properties (NYSE: VICI) and Penn National Gaming (Nasdaq: PENN).

JD Group, a Beijing-based financial holding firm, is seeking a buyer for Hong Kong-based FTLife Insurance Co. for between $2 billion and $2.5 billion, per Reuters.

Nordzucker, a German sugar refiner, is in talks to buy Australia’s Mackay Sugar.


Centre Lane Partners of New York has secured $200 million for its fourth middle-market private equity fund, which is targeting a total of $700 million, per an SEC filing.

GoAhead Ventures of Menlo Park is raising $100 million for its second fund, per an SEC filing.

It's Personnel

Eric Baggesen, CalPERS’ managing director for asset allocation, is serving as the pension giant’s interim CIO, until new hire Yu Ben Meng takes over in January.

Mike Dolce (ex-BAML) and Josh Damon (ex-Ankura Consulting) have joined Madison Dearborn Partners as head of capital markets and head of portfolio resources, respective. The firm also promoted Jason Shideler, Annie Terry, Karla Bullard and Dave Prequet to managing directors, and Erin Arnold to director.

Jake Flomenberg has left Accel to join Wing Venture Capital as a partner.

Amy Mahon joined law firm Simpson Thatcher as a London-based partner focused on M&A. She previously was with Clifford Chance.

Final Numbers: Tech Buyout Surge

More from Preqin:

  • Just over 40% of global tech PE deals in 2018 have been add-ons.
  • Tech-focused PE fundraising hit $400 billion in both 2015 and 2016, but fell a bit short last year and was under $300 billion through the end of Q3 2018. That said, there has been an increase in generalist PE funds that do tech deals.
Dan Primack