May 23, 2019

Axios Pro Rata

Greetings from the home office, where it's good to be back after a day in D.C. for meetings at Axios HQ. Please invite your friends and colleagues to sign up at Okay, here we go...

Top of the Morning

Source: Giphy

One banker's hedge is another banker's hate, as we've seen twice over the past month.

  • When Clayton Dubilier & Rice recently agreed to buy Sirius Computer Solutions, it reportedly included language in the debt financing package that made it more difficult for direct lenders to hold credit default swaps on the bonds. Specifically, such "dual" holders would be unable to vote on creditor decisions, including potential defaults.
    • Per Reuters: "As investor activism rises, the borrower wants to prevent these holders from declaring a default that could pay off for their hedged trades."
    • There could be downside risk to private equity in terms of narrowing the borrower base, but many firms may find the trade-off acceptable.
  • Lyft last month threatened to sue Morgan Stanley, Uber's lead IPO banker, for allegedly helping some locked-up investors short the stock.
    • Even if Morgan Stanley did this, it's up for debate if this would be a violation of law or just of widely-accepted protocol.
    • The bank denied any wrongdoing, and Lyft hasn't yet filed suit.
    • A case may be stronger against the pre-IPO investor, if it had pledged in writing to not short the stock.

D.C. to VC: Former FDA Commissioner Scott Gottlieb has rejoined venture firm NEA as a full-time investing partner, as Axios first scooped yesterday. He'll also be my guest later today on the Pro Rata Podcast, discussing e-cigarettes.

  • Susan Rice, President Obama's former national security adviser and UN Ambassador, has joined Houston-based Amplo as a board partner. Amplo, founded in 2017 by NEA vet Sheel Tyle, focuses on "international deals that address broad social problems."

On demand: DoorDash's upcoming Series G round could net upwards of $1 billion in new capital, per a stock authorization filing in Delaware (sent to us by Prime Unicorn Index).

  • Shares are priced at a 68% premium to DoorDash's $400 million Series F round, which closed earlier this year at a $6.7 billion pre-money valuation.
  • It would be the food delivery giant's fourth funding round since the beginning of 2018.
  • No word yet on the lead investor, although existing backer SoftBank Vision Fund is expected to be heavily involved.

• It's taxing: Treasury Sec. Steve Mnuchin yesterday told the House Financial Services Committee that his Department has no plans to do anything in regards to the tax treatment of carried interest, just days after President Trump reiterated his interest in a change.

  • Mnuchin: "We’re not doing anything... Maybe during a technical corrections bill, if we ever get something from Congress, we can contemplate it."
  • While legislation is the most effective way to address carried interest taxation, it also would be possible for the IRS, which is a bureau within Treasury, to formally change its interpretation of current rules. But it doesn't sound like Mnuchin has any interest in that.

🎧 Pro Rata Podcast digs into the mobile mega-merger mess, as DoJ weighs the wisdom of T-Mobile US buying Sprint. My guest is Axios' Kim Hart. Listen here.


Source: Giphy

NASCAR Holdings agreed to buy racetrack owner and operator International Speedway Corp. (Nasdaq: ISCA) for around $2 billion in cash, or $45 per share.

  • Why it's the BFD: This deal could be the impetus for streamlining at the auto racing giant, which publicly acknowledged that its 38-race schedule is bloated. NASCAR now could reduce its overall number of races, but pour more resources into events at major tracks it would now control, including those in Daytona and Talladega.
  • Bottom line: This deal has been bedeviled by allegations of self-dealing, as the France family effectively controls both companies. But an institutional ISCA shareholder that filed a class-action lawsuit back in December now says it won't challenge the new deal price.
Venture Capital Deals

Solugen, a Houston-based producer of bio-based peroxide solutions, raised $32 million in Series B funding. Founders Fund led, and was joined by YC, Refactor Capital, Fifty Years and KdT Ventures.

Instawork, San Francisco-based on-demand staffing app for gig and hospitality workers, raised $18 million. Spark Capital, GV, and Burst Capital were joined by return backers Benchmark, YC, Tuesday Capital and SV Angel.

Quentic, a Berlin-based provider of EHS and corporate social responsibility SaaS, raised €15 million from return backers One Peak Partners and Morgan Stanley Expansion Capital.

Wild Earth, a Berkeley, Calif.-based pet food startup, raised $11 million in Series A funding. VegInvest led, and was joined by Radical Investments, Felicis Ventures, Founders Fund, Mars Petcare, Bits x Bites, VECTR and P.O.V.

Future, a San Francisco-based personalized fitness coaching program, raised $8.5 million in Series A funding led by Kleiner Perkins.

🚑 Mightier, a Boston-based developer of bioresponsive video games to help kids learn emotional regulation, raised $6.6 million in Series A funding. Foxkiser led, and was joined by Asset Management Ventures, FundRx and return backers Founder Collective, Slow Ventures and Project 11., an Israeli “autonomous threat hunting” startup, raised $5.4 million in seed funding co-led by YL Ventures and Blumberg Capital.

Dawex, a Paris-based data marketplace, raised €5 milllion from Amadeus, Itochu, Bouygues Construction and Caisse des Dépôts.

BeautyStack, a London-based booking app for independent beauty professionals, raised £4 million in seed funding led by Index Ventures.

Tracklib, a Swedish music sampling startup, raised $1.7 million in seed funding from Sony Innovation Fund and WndrCo.

Private Equity Deals

Bain Capital agreed to acquire a 27% stake in the U.S. business of listed South Korean food company CJ CheilJedang for $320 million.

Cove Hill Partners acquired a majority stake in LiveAuctioneers, a New York-based provider of live online auctions for fine and decorative art.

Cvent, a McLean, Va.-based portfolio company of Vista Equity Partners, acquired Wedding Spot, a San Francisco-based wedding venue sourcing platform. The seller was Honeybook, which is backed by firms like Aleph, Citi Ventures and Norwest Venture Partners.

Investcorp agreed to buy New York-based fund placement and advisory firm Mercury Capital Advisors.

🦕 L2 Capital Partners acquired Jurassic Quest, a producer of interactive dinosaur events.

Public Offerings

🚑 Bicycle Therapeutics, a British developer of cancer therapeutics based on bicyclic peptides, raised $61 million in its IPO. The company priced 4.3 million shares at $14 (low end of range), and will trade on the Nasdaq (BCYC) with Goldman Sachs as lead underwriter. It had raised around $93 million from firms like Tybourne Capital, Vertex Ventures, Cambridge Innovation Capital, Longwood Fund, Novartis, SR One, SVLS and Atlas Venture.

Meten, a provider of English language education in China, filed for a $100 million IPO. It reports $7.7 million of net income on $212 million for revenue in 2018, and plans to trade on the NYSE (MEDU) with Citi as lead underwriter.

Rattler Midstream, a Midland, Texas-based midstream infrastructure company spun out by Diamondback Energy (Nasdaq: FANG), raised $665 million in the largest energy IPO of 2019. The company priced 38 million units at $17.50 (within $16-$19 range), and will trade on the Nasdaq (RTLR) with Credit Suisse as lead underwriter.

More M&A

BP (LSE: BP) is nearing a sale of its stake in Egyptian oil and gas company GUPCO to Dubai-based Dragon Oil for over $600 million, per Reuters.

LondonMetric Property (LSE: LMP), a British warehouse operator, agreed to buy commercial and industrial REIT A & J Mucklow (LSE: MKLW) for around £415 million.

SCOR (Paris: SCR), a French reinsurer, agreed to buy Coriolis Capital, an asset manager specializing in natural disaster bonds, options, collateralized reinsurance and climate derivatives.

Zendesk (NYSE: ZEN) acquired Smooch, a Montreal-based conversational messaging platform.


Fika Ventures, a Los Angeles-based seed firm, raised $76 million for its second fund.

🚑 Fountain Healthcare Partners, a healthcare-focused VC firm with offices in Dublin and New York, raised €118 million for its third fund.

Granite Creek Capital Partners of Chicago raised $200 million for its second lower middle-market private equity fund.

It's Personnel

Tracy Harris is joining private equity firm Siris as a partner focused on IR and product strategy. She previously was a partner with StepStone Group.

Joseph Lombardo has joined mid-market “GP stakes” firm Stonyrock Partners as a managing director, per PE International. He previously was with AlpInvest, which also is the former firm of Stonyrock founder Sean Gallary.

Ross Mason, founder of MuleSoft, is joining venture firm SignalFire as a venture partner.

Final Numbers
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Data: Deutsche Bank; Chart: Axios Visuals

More from Axios Markets editor Dion Rabouin:

  • Data has consistently shown that trade between the U.S. and China is slowing down significantly, so much so that Mexico recently supplanted China as the top U.S. trading partner.
  • Analysts at Nomura now say there's a 65% chance the U.S. puts tariffs on all imports from China, and strategists at JPMorgan and Goldman Sachs are rewriting expectations as well.

Go deeper: For Trump, a China trade war election