WeWork doesn't have enough money to finish out 2019, and both of its known bailout options are nightmarish.
How We got here: The company reported $2.4 billion of cash at the end of June, with a first-half net loss of $904 million. At that pace, it should have been able to survive at least through the middle of 2020. But I'm told that it significantly increased spend in Q3, partially due to the lumpy nature of real estate cap-ex, believing it would be absorbed by $9 billion in proceeds from the IPO and concurrent debt deal.
Bigger picture: The WeWork debacle isn't yet having a tangible impact on most private market prices, despite headlines to the contrary.
Last night I emailed several late-stage VCs, to ask if they're seeing systemic valuation resets. A sampling of replies:
"A lot of talk but no action yet. In my experience, private valuations move slowly so it may be a bit before we see evidence."
"Back in late 2008/early 2009, only months after the financial crisis, pundits predicted valuations would collapse. I recall VC’s telling LP’s it would be a super-buyers market and that LP’s should load up in fill-in-the-blank-VC-fund. Guess what? Valuations, both for great and sort-of-great companies barely budged. Since then, I’ve largely abandoned the conventional thinking that lumps start-ups together into a single group of assets that move up and down together in price/value."
"Not sure there’s been enough time to see if prices are really moving down, but obviously lots of talk about it internally and externally. I’d say on three weeks of data all I’m really seeing is more questions and fewer overnight deals as people dig in a bit more."
"Not systemic. I do think there is more scrutiny for consumer companies (especially ones that are losing money or not real 'tech' companies). SaaS companies are still as strong as ever. Usually the private market lags the public market so maybe it’s coming."
Bonus: Even presidential candidates are chiming in:
🎧 Pro Rata Podcast digs into Silicon Valley's China problem, from Apple to Activision. I'm joined by Axios' Ina Fried. Listen here.
Uber (NYSE: UBER) agreed to buy a majority stake in Cornershop, a grocery delivery company focused on Latin America. Walmart had agreed to buy Cornershop in mid-2018 for $225 million, but the deal was blocked by Mexican regulators.
• Club Factory, a Chinese e-commerce platform for fashion, beauty, and electronics items, raised $100 million in Series D funding from firms like Qiming Venture Partners, Bertelsmann, and IDG Capital. http://axios.link/G5EG
🚑 Mogrify, a UK-based cell therapy startup focused on arthritis, raised $16 million in Series A funding. Ahren led, and was joined by Parkwalk, 24Haymarket, and the University of Bristol Enterprise Fund. http://axios.link/I7Uj
• American Securities and Lindsay Goldberg agreed to acquire AECOM’s (NYSE: ACM) management services unit, a contractor to the U.S. federal government. Bloomberg previously reported a $2.4 billion price-tag. http://axios.link/kO4x
• The Blackstone Group held unsuccessful talks to buy a stake in hedge fund Citadel, per Bloomberg. http://axios.link/HZSe
• EQT Partners is in talks to buy Herndon, Va.-based data center operator EdgeConneX from Providence Equity Partners for at least $2.5 billion, per Bloomberg. http://axios.link/24C9
• Five Elms Capital invested in FMX, a Columbus, Ohio-based provider of facilities and maintenance management software. http://axios.link/9Tu9
• KKR agreed to buy Hyperoptic, a British residential gigabit broadband provider, from Newlight Partners and Mubadala.
• Lovell Minnick Partners acquired Billhighway, a Troy, Mich.-based provider of software and payment solutions to membership-based organizations. www.billhighway.co
• Thoma Bravo agreed to buy British cybersecurity company Sophos Group (LSE: SOPH) for around $3.8 billion. http://axios.link/QjMa
• 3 companies plan to price U.S. IPOs this week: BellRing Brands, Innate Pharma, and Karat Packaging. http://axios.link/uDlL
🚑 Galera Therapeutics, a Malvern, Penn.-based developer of drugs for reducing inflammatory side effects of radiation therapy, filed for an $86 million IPO. It plans to trade on the Nasdaq (GRTX) with BAML as lead underwriter, and has raised VC funding from firms like NEA (20.4% pre-IPO stake), Novartis (17%), Novo Holdings (15%), Sofinnova Venture Partners (12.1%), Blackstone (7.4%), Clarus Ventures, Adage Capital Management, HBM Healthcare Investments, Nan Fung Life Sciences, RA Capital, Rock Springs Capital, Tekla Capital Management and Correlation Ventures. http://axios.link/f6v4
• Volkswagen is considering options for Lamborghini, including a possible sale or IPO, per Bloomberg. http://axios.link/4mnq
• Nike (NYSE: NKE) acquired TraceMe, a Seattle-based sports fan engagement platform founded by NFL quarterback Russell Wilson. TraceMe, which later rebranded to Tally, raised $9 million from backers like Madrona Venture Group, Clear Fir Partners, Bezos Expeditions, Rosecliff Ventures, and Joe Tsai. http://axios.link/hF0l
⛽ ConocoPhillips (NYSE: COP) agreed to sell its northern Australian business to Santos (ASX: STO) for US$1.39 billion. http://axios.link/suE3
• Flexport, a San Francisco-based freight logistics company that’s raised around $300 million in VC funding, acquired Crux Systems, a Burlingame, Calif.-based provider of tracking software for ocean containers. http://axios.link/4R6R
• MUFG Investor Services, the asset servicing unit of Mitsubishi UFJ Financial Group, agreed to buy select parts of Maitland’s funds administration business. www.maitlandgroup.com
• Netmarble, a South Korean gaming company, was named the preferred bidder for a 25% stake in South Korean water purifier rental company Woongjin Coway, beating out suitors like Bain Capital and The Carlyle Group. http://axios.link/UoNv
• Qorvo (Nasdaq: QRVO) acquired Cavendish Kinetics, a San Jose, Calif.-based provider of RF MEMS technology for antenna-tuning applications. http://axios.link/0sOF
⛽ Total (Paris: TOTF) agreed to buy a 37.4% stake in listed Indian gas distributor Adani Gas for around $866 million. http://axios.link/KyRc
• Day One Ventures, a San Francisco-based early-stage VC firm, raised nearly $20 million for its third fund. www.dayoneventures.co
• Hiro Capital launched with a €100 million fund to back European e-sports and gaming startups. The firm is co-led by managing partner Luke Alvarez (ex-CEO of Inspired Entertainment) and Ian Livingstone (ex-chairman of Tomb Raider publisher Eidos). www.hiro.capital
• Jackson Square Ventures, a San Francisco-based VC firm, raised $193 million for its third fund. http://axios.link/wm81
• Thoma Bravo is in early talks to launch a $15 billion fundraise in early 2020, despite closing on $12.6 billion for Fund XIII just this past January, per Bloomberg. http://axios.link/IuRH
🚑 Jean-Luc Belingard, former chairman and CEO of Ipsen Group, joined Clayton, Dubilier & Rice as an operating advisor. www.cdr-inc.com
• Jeff Kearl, co-founder and former CEO of Stance, joined Pelion Venture Partners as a managing director. www.pelionvp.com
• Menka Sajnani is joining B Capital as head of investor relations. She previously led IR for Jungle Ventures. www.bcapgroup.com
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