Mar 29, 2019

Axios Pro Rata

Top of the Morning

Source: Giphy

Lyft last night raised around $2.34 billion in its IPO, selling more shares than expected and pricing at the top of its upwardly-revised range, sparking all sorts of concerns that we're at a market peak.

It's entirely possible that we're at or near the top, and that it's all downhill from here.

But we don't actually know, and certainly shouldn't extrapolate from the rush of unicorn tech companies going public.

  • The best of the past six years for VC-backed IPOs was 2012, in terms of offering proceeds, and that clearly wasn't a top.
  • If venture capitalists and crossover investors know this is a top, why are they still investing tons of cash into high-priced, growth-stage private companies?
  • If unicorn companies know this is a top, then shouldn't they have gone public last year, given the lockup restrictions (yes, this goes for VCs too).
  • If banks know this is a top, then their wealth management arms are committing malpractice by pushing high-net-worth clients into these IPOs.

Some more thoughts on Lyft's IPO:

  • This is the first $1 billion+ IPO on a U.S. exchange without Goldman Sachs or Morgan Stanley as an underwriter since went public in May 2014, per Renaissance Capital. The last U.S.-based issue was VMware back in August 2007, when Lehman Brothers was on the book.
    • Renaissance Capital's Matthew Kennedy emails: "Some obvious parallels with JD going public a few months ahead of its much larger rival (both GS & MS were part of the lead syndicate for Alibaba)."
  • Lyft reserved up to 5% of the offered shares for a program whose beneficiaries would include "drivers in good standing who have completed at least 10,000 rides on our platform." Such drivers could buy at the $72 per share price, but Lyft won't say how many drivers were eligible and/or participated.
  • Lyft and Uber are very different companies, particularly in terms of product and geographic focus. But Uber will, at least in part, be valued by investors on the revenue multiples set by Lyft.
  • The two big risk factors, from my perspective, are autonomous vehicles and labor regulation.
    • AVs could obviously help Lyft increase its margins and drive down its prices, but it also would open the ride-hail market up well beyond its current duopoly. Suddenly, it and Uber would be competing both with software giants (Google, etc.) and automakers (GM, etc.).
    • Lyft rang the Nasdaq bell in Los Angeles, where drivers have been protesting fee cuts. The more gig economy workers there are, the more national pressure there will be to guarantee them some sort of minimum wage (whether contract workers or not). These business models go further into the upside down if, for example, active drivers get $15 per hour (whether with passengers or not).
  • Both the market cap and fully-diluted valuations are way above the $15.1 billion Lyft last received from private market investors.
    • That's a big data point for growth equity investors who have insisted that private valuations are rational. If Lyft holds its price through the lockup period and other unicorn IPOs follow a similar path, then a lot of price critics from the past five years (sheepishly raises hand) will have to eat crow.

Source: Giphy

Ascena Retail Group (NYSE: ASNA), the parent company of Ann Taylor and Lane Bryant, is considering a sale of women’s clothing chain Dressbarn, per Bloomberg.

  • Why it's the BFD: When I was a kid, my mom and everyone else's mom shopped at Dressbarn. Apparently that's no longer true.
  • Context: Ascena said earlier this month that its value unit, which includes both Dressbarn and Maurices, was operating at an “unacceptable level of profitability.” Last week it agreed to sell Maurices to a private equity firm for $300 million.
  • Bottom line: "Any potential move comes as retailers face challenges that include a costly battle to ward off Amazon as it pushes deeper into apparel. Value retailers like Dressbarn are also up against fast-fashion rivals like H&M and Zara, which have won over a growing portion of younger shoppers." — Bloomberg
Venture Capital Deals

Carta, a Palo Alto-based provider of software for managing private company equity, is in talks to raise around $300 million new funding led by Andreessen Horowitz at a $1.8 billion valuation, per The Information.

1stdibs, a New York-based online marketplace for luxury items like art, furniture and jewelry, raised $76 million in Series D funding. T. Rowe Price led, and was joined by Groupe Artemis, Foxhaven Asset Management, Sofina Group and Allen & Co.

🚑 Inivata, a UK-based liquid biopsy startup, raised $52.6 million in new Series B funding. RT Ventures was joined by return backers Johnson & Johnson Innovation, Cambridge Innovation Capital, IP Group, and Woodford Patient Capital Trust.

ActivTrak, an Austin, Texas-based provider of productivity monitoring software, raised $20 million in Series A funding led by Elsewhere Partners.

🚑 Hyalex Orthopedics, a Lexington, Mass.-based developer of a medical device with synthetic polymer that mimics cartilage, raised $17 million in new Series A funding (round total now $33m). Strategic Healthcare Investment Partners and DSM Venturing were joined by return backers Canaan Partners, Osage University Partners and Johnson & Johnson Innovation.

Entangled Group, a San Francisco-based education venture studio, raised $15 million in Series B funding from Hereditas Capital Management, TDM Partners and Rethink Education.

Dvele, a Loma Linda, Calif.-based digital platform for offsite home production, raised $14 million in Series A funding led by Crescent Real Estate.

🚑 Xealth, a Seattle-based digital prescribing platform, raised $11 million in Series A funding from firms like McKesson Ventures, Novartis, ResMed, Threshold Ventures, Providence Ventures, UPMC and the Medical College of Wisconsin Health Network.

Private Equity Deals

🚑 Bain Capital agreed to acquire a majority stake in Maesa, a beauty brand incubator with offices in New York and France.

The Carlyle Group invested in Tokiwa, a Japanese cosmetics R&D and manufacturing company.

Huntington Solutions, a Greer, S.C.-based provider of custom-engineered molded foam solutions, acquired the assets of RADVA, a Radford, Va.-based maker of protective and temperature-sensitive foam packaging solutions. Huntington is a portfolio company of Mill Point Capital.

Madison Dearborn Partners acquired a majority stake in Lightspeed Systems, an Austin, Texas-based provider of web filtering and mobile device management software for the K-12 education market.

Omni Environmental Solutions, a portfolio company of One Equity Partners, acquired Force Environmental Solutions, an Indiana, Penn.-based provider of environmental equipment and transportation to energy producers.

Public Offerings

Jumia, a pan-African e-commerce platform, set IPO terms to 13.5 million shares being offered at $13-$16. It would have a fully-diluted market value of $1.15 billion, were it to price in the middle, and plans trade on the NYSE (JMIA) with Morgan Stanley as lead underwriter. Major shareholders include Rocket Internet, with a 20.6% pre-IPO stake, while Mastercard Europe has agreed to invest €50 million via an investment concurrent to the IPO.

Liquidity Events

🚑 Guardant Health (NYSE: GH) agreed to acquire Bellwether Bio, a Seattle-based developer of cell-free DNA-based cancer diagnostics. Bellweather was seeded by The W Fund, WRF Capital and Bioeconomy Capital.

Mubadala Investment Co. is weighing exit options for Canadian plastics maker Nova Chemicals, which could fetch over $10 billion, according to Bloomberg.

More M&A

🚑 Colgate-Palmolive (NYSE: CL). has entered the auction for Nestle’s consumer skin-care business, per Bloomberg. Other bidders include Unilever, KKR, EQT Partners, The Carlyle Group and a consortium of Advent International with Cinven and GIC.

The Financial Times is buying Deal Street Asia, a news site focused on financial transactions in Asia.

Forge, a San Francisco-based trading platform for private shares, agreed to buy San Carlos, Calif.-based custodial trust company IRA Services for $55 million. Forge last year raised $50 million from Munich Reinsurance America, Panorama Point Partners, Operative Capital and Financial Technology Partners.

Kirkbi, the family holding company that owns Lego, agreed to buy a majority stake in the U.S. affiliate of German solar developer Enerparc AG.

🍪 Mondelez (Nasdaq: MDLZ) is in advanced talks to buy a portfolio of international cookie brands being sold by Campbell Soup Co. (NYSE: CPB) for around $2.5 billion, per Bloomberg.

Progress (Nasdaq: PRGS) agreed to buy Ipswitch, a Burlington, Mass.-based maker of data file transfer and network management software, for $225 million in cash.

Qutoutiao (Nasdaq: QTT), a Chinese news aggregation app, agreed to a $171 million convertible loan from Alibaba. Upon conversion, it would represent around a 4% stake.

ZF Friedrichshafen of Germany agreed to buy Wabco (NYSE: WBC) for over $7 billion. The $136.50 per share deal represents a 13% premium to where Wabco traded in late February before disclosing a possible deal.


Betaworks is raising $75 million for its second VC fund, per an SEC filing.

It's Personnel

• Bob Carroll is joining GSO Capital, an affiliate of The Blackstone Group, as a managing director and head of distressed trading. He previously was with hedge fund Smith Cove Capital.

Colm Kelleher stepped down as president of Morgan Stanley.

Tim Sloan stepped down, effective immediately, as CEO of Wells Fargo. He’ll be succeeded on an interim basis by company general counsel Allen Parker.

Scale Venture Partners promoted Jeremy Kaufmann to principal.

Final Numbers
Source: Refinitiv