Aug 7, 2020

Axios Pro Rata

By Dan Primack
Dan Primack

🏖️ Vacation plans: I'll be out next week, with Kia Kokalitcheva taking the newsletter reins. Be sure to send her news, tips, and summer cocktail recipes at kia@axios.com.

🎧 Axios Re:Cap digs into America's middle class pandemic, with author and NYT economics reporter Jim Tankersley. Listen via Apple or via Axios.

Top of the Morning

Illustration: Aïda Amer/Axios

TikTok has become a Rorschach test for how U.S. politicians view China, with little consensus on the specifics of its threat to homeland security.

Driving the news: President Trump last night issued two executive orders related to Chinese tech. One pledged to ban TikTok if it's not sold by Sept. 20 by parent c0mpany ByteDance, while the other focused on Chinese messaging app WeChat and its parent company Tencent.

Between the lines: The executive orders were sloppily worded.

  • The TikTok EO claimed there can be no "transactions" with the company after the 45-day deadline, even though it's nearly impossible to imagine that Microsoft or any other buyer could close a deal by then. A senior White House official later told me that there just must be a satisfactory deal in place, not completed.
  • TikTok this morning said the EO "risks undermining global businesses' trust in the United States' commitment to the rule of law."
  • The WeChat EO suggests that U.S. entities can't enter transactions with not only WeChat, but also with parent company Tencent. The same WH official was less clear when I asked for clarification on this one.
  • It matters because, if read literally, Tencent would need to divest its numerous investments in U.S. tech companies within the next 45 days, or else hold them forever. Companies like Reddit and Fortnite maker Epic Games. And, if it holds them, what happens if a kid buys something from Fortnite? Is that a violation?

TikTok deal impact: Not too much, unless it angers the Chinese government to the point of nixing any TikTok sale.

  • Microsoft is now racing to getting an agreement done with ByteDance — having chosen to first focus on CFIUS and other U.S. politics. It takes Trump's deadline seriously.
  • However, some big issues remain outstanding, including pricing and what TikTok geographies it plans to buy, per a source close to the process.

But, but, but: Other U.S. tech companies operating in China must be nervous this morning about retribution. Plus, many of them use WeChat to market to Chinese consumers.

Back to the top: Much of what D.C. fears about TikTok is fear itself.

  • Trump trade adviser Peter Navarro told me Monday that he's worried about the Chinese government accessing passwords and location data, given laws that require data disclosure to the Chinese government upon request.
  • Some remain wary of possible "back doors" into devices, after security flaws were discovered (and remedied) earlier this year.
  • Others believe the threat is more cultural, arguing that the Chinese government could use TikTok's algorithm to promote content that destabilizes U.S. politics or society.
  • The White House EO reflects all of these concerns.

The bottom line: The U.S.-China trade war is escalating, with social apps substituted for soybeans.

Also...

The Long-Term Stock Exchange just took a giant step toward launch, telling Axios that it’s named a 10-person board of directors and held its first board meeting yesterday.

  • LTSE is the brainchild of “The Lean Startup” author Eric Ries, and is designed to encourage long-term investments and provide enhanced transparency.
  • It’s not your run-of-the-mill Silicon Valley board, as it includes eight women (including three women of color).
  • LTSE was supposed to open for business in Q1, having raised $70 million late last year, but Ries says things got delayed by the pandemic. He now expects to soon begin trading test securities and then ramp up to full trading capability. If everything goes according to plan, launch would be within a couple months.

When Ben Meng suddenly resigned as chief investment officer of CalPERS, America’s largest public pension system, the press release quoted Meng as saying “it’s important for me to focus on my health and on my family.”

  • Now, though, CalPERS officials are slowly acknowledging what seemed obvious: Meng’s decision was likely influenced by blogger Susan Webber’s discovery that Meng had filed inaccurate conflict-of-interest disclosures, including a failure to note personal investments in private equity firms that regularly seek business from CalPERS.
  • Betty Yee, California’s state controller and a CalPERS director, told the Sac Bee that she was disappointed by a “lapse in both judgment and adherence to standard conflict-of-interest policies.”
The BFD

Illustration: Aïda Amer/Axios

Intercontinental Exchange (NYSE: ICE) agreed to buy Ellie Mae, a Pleasanton, Calif.-based provider of mortgage finance software, from Thoma Bravo for $11 billion.

  • Why it's the BFD: This is the largest acquisition ever for Intercontinental Exchange, as it only spent $8.2 billion to buy the New York Stock Exchange in 2012. It also pushes ICE much further into the mortgage finance market, following smaller deals for MERS (2016) and Simplifile (2019).
  • ROI: This is a quick and lucrative flip for Thoma Bravo, which last year took Ellie Mae private for $3.75 billion.
  • Details: The $11 billion enterprise value is mostly debt. ICE will finance the deal via cash and stock, at an 84%/16% split, with expectations that it closes by year-end.
  • The bottom line: "Acquiring Ellie Mae would put ICE closer to the origination of home loans, expanding its reach to the mortgage lenders, brokers and other players that come together before a loan is closed. ICE’s current mortgage business is more focused on warehousing and processing data on home loans after they close." — Alexander Osipovich, WSJ
Venture Capital Deals

🚑 Fractyl, a Lexington, Mass.-based developer of diabetes treatments, raised $55 million in Series E funding. Taiwania Capital Management led, and was joined by Catalio Capital Management, CDIB VC, YJ Capital and return backers Bessemer Venture Partners, General Catalyst, Domain Associates, Mithril Capital Management, Emergent Medical Partners, True Ventures, and GV. http://axios.link/yufm

Mode Analytics, a San Francisco-based analytics platform for data scientists, raised $33 million in Series D funding. H.I.G. Growth Partners led, and was joined by Valor Equity Partners, Foundation Capital, REV Venture Partners, and Switch Ventures. http://axios.link/bVuf

TemperPack, a Richmond, Va.-based maker of recyclable insulation for home delivery of perishable foods and temperature-sensitive medicines, raised $31.3 million in Series C funding. Wheatsheaf Group led, and was joined by return backers Revolution Growth, Harbert Growth Partners, SJF Ventures, Arborview Capital, Tao Capital, Third Prime Capital, and Greenhouse Capital. www.temperpack.com

StreetLight Data, a San Francisco-based provider of multimodal transportation data, raised $15 million in Series D funding. Macquarie Capital and Activate Capital co-led, and were joined by Osage University Partners and Ajax Investment Strategies. http://axios.link/4qsi

Zencity, an Israeli startup that helps local governments make data-driven decisions, raised $13.5 million. TLV Partners led, and was joined by Salesforce Ventures, Canaan Partners Israel, Vertex Ventures, M12, and i3 Equity Partners. http://axios.link/858M

Orum, an automated programming interface for helping financial institutions move money, raised $5.2 million. Homebrew led, and was joined by Acrew, Bain Capital Ventures, Clocktower, BoxGroup, and Inspired Capital. http://axios.link/4jjA

🚑 Retina-AI Health, a Houston-based provider of diabetic retinopathy screening tech, raised $5.2 million in Series A funding from backers like Shipt founder Bill Smith. http://axios.link/BzUS

Approve.com, an Israeli enterprise procurement platform, raised $5 million in seed funding led by Aleph. http://axios.link/FL0S

Clean.io, a Baltimore-based cybersecurity startup focused on advertising malware, raised $5 million in Series A funding. Tribeca Venture Partners led, and was joined by Real Ventures, Inner Loop Capital, and Grit Capital Partners. http://axios.link/Yv4m

HyperQube Technology, an Arlington, Va.-based “cyber range as a service” startup, raised $2.5 million in seed funding led by Leawood VC. http://axios.link/cLzG

Private Equity Deals

Gen Cap America acquired TFM Services, a Wichita, Kan.-based provider of janitorial services and floor maintenance. www.tfmservices.net

Marlin Equity Partners acquired Pentalog, a French provider of business software development and digital services. www.pentalog.com

MiddleGround Capital acquired a majority stake in Dura Automotive Systems, an Auburn Hills, Mich.-based maker of auto parts and control systems, from Bardin Hill Investment Partners. http://axios.link/jHgo

Public Offerings

Big Hit Entertainment, the music label of K-pop band BTS, received preliminary approval for a Seoul IPO that could value the company at upwards of $5 billion. http://axios.link/tEjD

🚑 Checkmate Pharma, a Cambridge, Mass.-based developer of cancer immunotherapies, raised $75 million in its IPO. It sold 5 million shares at $15 million (middle of range), for an initial market cap of $322 million, were it to price in the middle, and will list on the Nasdaq (CMPI) with BOA as lead underwriter. Checkmate had raised around $175 million in VC funding from Sofinnova Ventures (21.1% pre-IPO stake), VenBio (21.1%), Novo Holdings (10.2%), Longitude Venture Partners (8.9%), Decheng Capita (7.5%), F-Prime Capital (5.6%), Meidixi (5.1%), and Omega Fund (5.1%). http://axios.link/dkJD

Duck Creek Technologies, a Boston-based provider of insurance industry SaaS, set IPO terms to 15 million shares at $19-$21. It would have an initial market cap of $2.57 billion, were it to price in the middle, and plans to list on the Nasdaq (DCT) with Goldman Sachs and JPMorgan as lead underwriters. The company reports a $8.5 million net loss on $153 million in revenue for the nine months ending May 31, and raised $350 million in VC funding from firms like Kayne Anderson, Apax Partners, Accenture, Dragoneer, Insight Partners, Temasek, and Neuberger Berman, and Whale Rock Capital. http://axios.link/sJ9Y

Fortis Minerals, a Houston-based oil and gas mineral interests royalties firm backed by EnCap Investments, withdrew IPO registration. http://axios.link/gWhe

Lojas Quero-Quero, a Brazilian home improvement retailer owned by Advent International, launched a Sao Paulo IPO that could raise around $412 million. http://axios.link/HJD0

SPACs

🚑 ARYA Sciences Acquisition III, a health care-focused SPAC formed by Perceptive Advisors, raised $130 million in its IPO. http://axios.link/RZhe

CF Finance Acquisition II, a new SPAC formed by Cantor Fitzgerald, filed for a $525 million IPO. This comes just days after Cantor Fitzgerald’s initial SPAC agreed to acquire alternative asset manager GCM Grosvenor. http://axios.link/ww0F

FTAC Olympus Acquisition, a fintech-focused SPAC formed by management of The Bancorp, filed for a $750 million IPO. http://axios.link/IK8X

PMV Consumer Acquisition, a consumer industry-focused SPAC formed by the Gabelli Group, filed for a $175 million IPO. http://axios.link/yABz

Ucommune, WeWork's largest rival in China, is canceling a planned NYSE IPO in favor of going public via a reverse merger with a SPAC called Orisun Acquisition (Nasdaq: ORSN). http://axios.link/e7JZ

More M&A

🚑 Denali Therapeutics (Nasdaq: DNLI) secured a $465 million investment from Biogen (Nasdaq: BIIB), as part of a broader strategic agreement to develop Parkinson’s disease drugs. http://axios.link/LenB

TGS (Oslo: TGS), a Norwegian seismic surveyor, offered to buy the mutli-client library of rival PGS (Oslo: PGS) for $600 million in cash. http://axios.link/Mrrm

ValueAct Capital has sold its entire stake in Rolls-Royce (LSE: RR), five years after becoming its largest outside shareholder, per the FT. http://axios.link/MRZB

Fundraising

🚑 DCVC Bio, an early stage VC firm focused on deep tech life sciences, raised $350 million for its second fund. http://axios.link/HSWr

MetaProp, a New York-based VC firm focused on the property tech market, is raising up to $200 million for its fourth fund, per an SEC filing. http://axios.link/xtZV

Wunala Capital, a new Australian VC firm led by Scott Wilson (ex-Macquarie), is raising A$100 million for its debut fund, Axios has learned. It will focus on pre-IPO tech and tech-enabled companies. www.wunalacapital.com

It's Personnel

Michael Kane joined Piper Sandler as a managing director of equity capital markets and head of convertible and equity-linked origination. He previously was with Cantor Fitzgerald. www.psc.com

Chris Satchell joined Clayton, Dubilier & Rice as an operating principal. He previously was chief technology officer at Zume. www.cdr-inc.com

Final Numbers
Data: Bureau of Labor Statistics; Chart: Axios Visuals
  • The bottom line, per Axios' Courtenay Brown: "The labor market continued to recover but the pace of job growth slowed significantly from June’s 4.8 million job gain, suggesting a stalled recovery as coronavirus cases surged and states pulled back on reopening plans."
Dan Primack

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