Oct 2, 2018

Axios Pro Rata

By Dan Primack
Dan Primack

Situational awareness: Amazon this morning raised the minimum wage for all of its U.S. workers to $15 per hour, including part-timers and seasonal workers. Got to wonder how this will affect Amazon worker unionization efforts, particularly at Whole Foods...

Top of the Morning
Bob Riha/Getty Images

Eighty-three percent of U.S. IPOs this year have involved unprofitable issuers, which represents an all-time high, according to data from University of Florida finance professor Jay Ritter (first reported by the WSJ).

That on its own isn't necessarily worrisome, until you realize the previous record was in 2000 (81%).

  • So is this dotcom bust 2.0? Maybe. Seriously, let's not entirely discount that possibility just because everyone keeps assuring us that the companies have "real" business models and Internet adoption is now ubiquitous. I find it highly unlikely, but skepticism is always worthwhile when investors march in talking point lockstep ("this time is different").
  • Expect the percentage to only grow, as all five of this week's expected IPOs are unprofitable. (note: Ritter doesn't include SPACs in his data, so I excluded Arya Sciences, which is also expected to price this week.)
  • The silver linings, however, are also compelling. One is that the actual percentage of unprofitable tech issuers is a bit lower in 2018 than in 2000, with the difference largely made up by a surge in biotech listings. Another is that the average VC-backed company is much older at IPO in 2018 than it was in 2000, suggesting more maturity and a greater likelihood of working its way out of troubles.

• Another calendar comp: Oaktree Capital's Howard Marks tells Axios' Courtaney Brown that 2018 is looking a lot like 2006: "It's easy to get transactions done, even ones which don't have a lot of virtue." Read the full Q&A here.

• Top tier turnover: Two of Benchmark's longtime general partners, Matt Cohler and Mitch Lasky, are stepping back as the venerable venture capital firm raises its ninth fund, per both an SEC filing and sources close to the situation.

  • Cohler was one of the earliest Facebook employees, and led Benchmark's investments in companies like Dropbox, Instagram and Domo. He's also been its rep on Uber's board since late last year. Lasky, a former gaming executive, is best known at Benchmark for leading its early investment in Snapchat.
  • It's an amicable split, with both Cohler and Lasky retaining board seats and possibly making investments going forward.
  • Benchmark's ninth fund is all done except the final paperwork, with allocations already set on its $425 million target. Word is that the only change is that a few funds-of-funds got booted in favor of charitable foundations and college endowments. Also expect another $100 million or so in a co-investment vehicle for Benchmark partners, friends and founders.
  • It's also worth noting that Benchmark has a pair of portfolio companies hitting the public markets this week, in Elastic and UpWork.

• More venture-land: Sources say that Ben Ling is stepping down as an investment partner with Khosla Ventures, as he wraps up fundraising for a new effort called Bling Capital. Word is that he'll retain some of his KV board seats.

  • More KV: The Supreme Court refused to hear Vinod Khosla's appeal related to his efforts to restrict access to a California beach he owns (but never apparently visits). Khosla may feel this is a major loss for property rights, but the end of this case can only be good for his own legacy and his firm's reputation.

🎧 Pro Rata Podcast: Our latest episode is on Elon Musk's surprise settlement with the SEC, and I'm joined by Axios' Felix Salmon. Listen here.

  • Related: Tesla said today that it hit Q3 production goals.
Source: Giphy

AM General, the South Bend, Ind.-based maker of Humvees, hired Macquarie Group to find a buyer, per Reuters. The company could fetch more than $2 billion.

  • Why it's the BFD: Because this would be as much a bet on the future of military vehicles as a reflection of AM General's past success, with the U.S. Army in the midst of a major modernization initiative.
  • Bottom line: "A possible sale of AM General follows a rash of deals over the past 18 months among defense contractors. But relatively fewer makers of defense equipment have gone on the auction block." — Mike Stone, Reuters
Venture Capital Deals

• Tanium, an Emeryville, Calif.-based cybersecurity company, raised $200 million at a $6.5 billion post money valuation. Wellington Management led, and was joined by Ballie Gifford and Adage Capital Management. http://axios.link/sBWX

🌽 Pivot Bio, a San Francisco-based developer of an alternative to synthetic nitrogen fertilizer for corn crops, raised $70 million in Series B funding led by Breakthrough Energy Ventures. www.pivotbio.com

• ExecOnline, a New York-based provider of certificate-bearing leadership and development programs, raised $18 million in Series C funding. ABS Capital Partners led, and was joined by New Spring Capital, Osage Partners, Kaplan, and New Atlantic Ventures. www.execonline.com

• Arcadia Data, a San Mateo, Calif.-based provider of visual analytics software, raised $15 million in Series B funding. Pelion Venture Partners led, and was joined by return backers Intel Capital, Mayfield and Blumberg Capital. www.arcadiadata.com

• Bloom & Wild, a London-based online flower seller, raised £15 million. Piper led, and was joined by MMC Ventures and Burda Principal Investments. www.bloomandwild.com

• DrumG, an enterprise blockchain startup based in Bermuda, raised $6.5 million led by blockchain startup ConsenSys. http://axios.link/pV1f

• Lingokids, a Madrid-based provider of software that helps kids learn a second language, raised $6 million in Series A funding. Holtzbrinck Ventures led, and was joined by JME VC, Sabadell Ventures, Big Sur Ventures and Gwynne Shotwell. http://axios.link/tQS8

• Slamcore, a UK-based developer of spatial AI algorithms for robots and drones, raised $5 million. Amadeus Capital Partners led, and was joined by MMC Ventures Octopus Ventures and return backers Mirai Creation Fund and Toyota AI Ventures. www.slamcore.com

• Re:Store, a co-working and retail space startup for online brands, raised $1.7 million led by Sequoia Capital. http://axios.link/DqYb

🥩 Meatable, a lab-grown meat startup, raised $3.5 million in funding led by Blue Yard Capital. http://axios.link/Pyfz

Private Equity Deals

• Alleghany Capital acquired a majority stake in Concord Hospitality Enterprises, a Raleigh-based hotel management and development company. www.concordhotels.com

• Ansira, a St. Louis-based portfolio company of Advent International, acquired Defakto, a Dallas-based Adobe solutions provider. http://axios.link/oAUH

• The Carlyle Group and GIC completed their €10.1 billion purchase of the specialty chemicals business of Akzo Nobel. http://axios.link/21cJ

⛽ Cotton Creek Capital acquired Vecta, a Gonzales, La.-based provider of industrial and environmental services. www.vectavenvironmental.com

⛽ Encana (TSX: ECA) agreed to sell its San Juan oil acreage assets in New Mexico to DJR Energy, a portfolio company of Trilantic Capital and Waveland Energy Partners, for $480 million. http://axios.link/REDi

🚑 Gen Cap America acquired OPTP, a Minneapolis-based provider of physical therapy, fitness and wellness products. www.optp.com

🚑 Platinum Equity completed its $2.1 billion purchase of diabetes monitoring business LifeScan from Johnson & Johnson (NYSE: JNJ). http://axios.link/uNJN

• TSG Consumer Partners acquired a minority stake in Dutch Bros Coffee, a Grants Pass, Ore.-based drive-thru coffee company. http://axios.link/v3Vz

Public Offerings

Six companies expect to price IPOs in the U.S. this week: Arya Sciences, Elastic, Guardant Health, Kodiak Sciences, UpWork and YayYo.

Elastic, a provider of subscription-based data search software, increased its IPO price range from $26-$29 to $33-$35. It still plans to offer 7 million shares and trade on the NYSE (ESTC) with Goldman Sachs as lead underwriter. The company reports a $19 million net loss on $57 million in revenue for H1 2018, and raised over $100 million in VC funding from firms like Benchmark (17.8% pre-IPO stake), Hexavest (10.5%), NEA (10.2%) and Future Fund (8.2%). http://axios.link/vvYB

Latitude Financial, an Australian mortgage lender backed by KKR and Deutsche Bank, has postponed its planned IPO. The official reasons are market conditions and management changes, but Australia’s entire financial sector is under pressure from a federal investigation into misconduct. http://axios.link/tCsF

Livent, a Philadelphia-based maker of lithium batteries for electric vehicles, set IPO terms to 20 million shares at $18-$20. It would have a fully-diluted market value of $2.7 billion, were it to price in the middle. The company is being spun out of FMC Corp. (NYSE: FMC), and plans to list on the NYSE (LTHM) with BofA Merrill Lynch as lead underwriter. It reports $70 million of net income on $211 million in revenue for the first half of 2018. http://axios.link/y3Ht

StoneCo, a Brazilian online payment processor, filed for a $100 million IPO. It plans to trade on the Nasdaq (STNE) with Goldman Sachs as lead underwriter. The company reports $23 million of net income on $165 million in revenue for the first half of 2018. Shareholders include Madrone Partners and Tiger Global. http://axios.link/Pqpi

Liquidity Events

Industrial Opportunity Partners sold Toledo Molding & Die, a Toledo, Ohio-based maker of thermoplastic auto components and assemblies, to Germany’s Grammer. www.tmdinc.com

More M&A

🚑 Fresenius of Germany won a court battle over its decision to bail on a $4.3 takeover of Illinois generic drugmaker Akorn (Nasdaq: AKRX), with a Delaware judge saying Fresenius had valid reason to be worried about data integrity and certain financial issues. http://axios.link/cVkg

General Electric (NYSE: GE) agreed to sell its “intelligent platforms” unit to Emerson Electric (NYSE: EMR). http://axios.link/t1Nq

Mars agreed to sell its coffee business to Italy’s Lavazza for around $650 million (including assumed debt). http://axios.link/Fml2

Penn National Gaming (Nasdaq: PENN) received FTC approval for its $2.8 billion purchase of Las Vegas-based casino company Pinnacle Entertainment (Nasdaq: PNK), so long as it complete divestitures of casino assets in Cincinnati, St. Louis and Kansas City to Boyd Gaming. http://axios.link/YJzI

United Technologies (NYSE: UTX) received U.S. antitrust approval for its $23 billion purchase of Rockwell Collins (NYSE: COL), so long as it divests two businesses. Chinese approval remains pending. http://axios.link/xlkl


Level Equity raised $535 million for its fourth growth equity fund, and another $200 million for a new opportunities fund. It also promoted Charles Chen to partner. www.levelequity.com

It's Personnel

Sridhar Ramaswamy is stepping down as Google's head of advertising and commerce in order to join VC firm Greylock as a venture partner.

• Adam Weinstein and Tony Feuerstein both left Akin Gump to join private equity and M&A law practices at Sidley Austin. http://axios.link/8iuc

Final Numbers
Source: Thomson Reuters Deals Intelligence; Data through Q3 2018.
Dan Primack