Axios Pro Rata

The story of last week's Snowflake and Unity Software IPOs had little to do with data warehousing or 3D game development, and lots to do with dizzying "pops" after pricing.

What happened: The Robinhood effect.

By the numbers:

• Unity priced its IPO at $52 per share and began trading Friday at $75 per share. It later pulled back a bit to close at $68.35, but that was still up more than 31%.
• Snowflake priced at $120 per share and began trading Wednesday at a whopping $245 per share. It closed Friday trading at $240.

Between the lines: People close to both IPOs say that the increases were driven almost exclusively by retail traders, which represented single-digit percentages of the floats.

• “The institutions didn’t sell,” says a source involved with Snowflake. “What you saw was a Robinhood feedback loop.”
• Unity implemented an online bidding system, designed by the company and coded/implemented by Goldman Sachs, whereby all potential institutional investors had to enter IPO requests at different ranges with nobody submitting market orders. For example, Primack Investors LP said it would buy 200k shares at $52, but only 100k shares at $55. This gave Unity much more demand curve data, but still couldn’t account for retail investors (or for its own employees, who had lighter lockups than is typical).

To be sure, underwriters are tasked with helping to anticipate retail demand – and just because institutions aren’t selling doesn’t mean they aren’t lending. But it’s not correct to claim, for example, that Snowflake could have priced the IPO at $245 and that the delta was lost working capital.

The bottom line: Every IPO issuer wants pricing efficiency, with Unity taking it more seriously than most. But there's little they can do once their shares float into irrational exuberance.

President Trump on Saturday approved "in concept" a deal whereby TikTok will be allowed to continue operating in the U.S., with Oracle as its "trusted technology partner."

The big picture: It's not a done deal, with some details still to be ironed out and new public disagreements over what's already been agreed to.

• Axios' Scott Rosenberg writes: "The deal, full of provisions aimed at creating the temporary appearance of a presidential win, looks like a sort of Potemkin village agreement."

The latest: Broad strokes of the agreement are said follow what Axios' Ina Fried reported last week, including the creation of two separate boards of directors.

• One board would be for U.S.-based TikTok Global, which at some point is likely to subsume TikTok operations outside of the U.S. It would include four U.S. citizens, likely including Walmart CEO Doug McMillon, with expectations that ByteDance CEO Zhang Yiming would be the fifth. Oracle would not hold a tikTok Global board seat.
• There also would be a separate board to oversee U.S. tech issues, with those directors to be approved by the U.S. government.
• U.S. sources say the cap table of TikTok Global would be a replica of the current ByteDance cap table, including the ByteDance employee option pool, with everyone then diluted 20% so that Oracle and Walmart can take their cut. ByteDance itself would not technically have shares.
• That means it would be around 53% U.S.-held (including U.S.-based VC firms) and around 36% China held.
• ByteDance claimed overnight that TikTok Global would be a subsidiary of ByteDance — a structure that U.S. sources dispute.

The companies also said that TikTok Global would pay around $5 billion to the U.S. Treasury, but this is not the extortionesque payment that President Trump publicly sought. Instead, this is an estimate of payroll taxes over an unspecified period of time, assuming TikTok Global were to hire around 25,000 U.S. employees.

• Trump also claimed TikTok Global agreed to invest $5 billion into a new education foundation to support "patriotic" curriculum, but multiple sources close to the deal have told us this is just not true.
• There will be an education-focused effort — using TikTok's short video format as a distribution tool — but there is no dollar amount tied to it, with Trump seeming to conflate the payroll tax figure with the ed fund.
• Remember, TikTok Global doesn't have $5 billion. At least not until its IPO, which it wants to complete within 12 months (best efforts, no promises).

The bottom line: We won't get full transparency until and unless the term sheet gets released. Normally that would be a nonstarter — but normally a private company transaction isn't prompted, negotiated, and approved by the U.S. government.

• "Axios Re:Cap" digs into how the Trump ban threat played inside of TikTok, with NY Times reporter Taylor Lorenz. Listen via Apple, Spotify, or Axios.

Microsoft (Nasdaq: MSFT) agreed to buy ZeniMax Media, the parent company of game publishers like Bethesda, for $7.5 billion in cash. Sellers include Providence Equity Partners.

• Why it's the BFD: This reflects how seriously Microsoft takes gaming as a core part of its business, and should help propel the launch of its new cloud gaming suite. It also shows that Microsoft dealmakers aren't sitting around, licking their TikTok wounds.

• The bottom line: "With both a new a Xbox and Playstation due on in the coming months, the closing of such a deal could put Microsoft in a key position in terms of title exclusivity. The parties have yet to discuss how such a move will ultimately impact how big franchises like Elder Scrolls and Doom will be approached on competing systems." — Brian Heater, TechCrunch

• Next Insurance, a Palo Alto-based digital insurer for small businesses, is in talks to raise around $250 million led by CapitalG at a $2.25 billion valuation, per Bloomberg. http://axios.link/K74x

• Scopely, a Culver City, Calif.-based mobile game developer, is in talks to raise at least $200 million at around a $3 billion valuation co-led by Wellington Management and NewView Capital, per Bloomberg. http://axios.link/2ti9

• Mobile Premier League, an Indian e-sports and mobile gaming platform, raised $90 million in Series C funding. SIG, RTP Global, and MDI Ventures were joined by return backers Sequoia India, Go-Ventures, and Base Partners. http://axios.link/mIrA

• Outschool, a San Francisco-based live video platform for online classes, raised $45 million in Series B funding. Lightspeed Venture Partners led, and was joined by return backers Reach Capital, USV, SV Angel, FundersClub, and YC. http://axios.link/dbg6

🚑 Immune Regulation, a British biotech focused on immuno-inflammatory diseases, raised $40.6 million in Series B funding. Morningside Ventures led, and was joined by 24Haymarket. http://axios.link/wppc

• WireBarley, a South Korean global remittances startup, raised $10 million in Series B funding from Magna Investment, Shinsegae I&C and Dt & Investment. http://axios.link/BRpk

🚑 Stemson Therapeutics, a San Diego-based developer of hair loss therapeutics, raised $7.5 million in seed funding co-led by Allergan Aesthetics and Fortunis Capital. http://axios.link/ZCqe

• Accelercomm, a British channel coding startup, raised £5.8 million in Series A funding. IQ Capital led, and was joined by seed backers Bloc Ventures and the IP Group. www.accelercomm.com

• Ahana, a San Mateo, Calif.-based provider of self-service analytics for Presto, raised $2.3 million in seed funding. Lux Capital led, and was joined by return backer GV. www.ahana.io

• Garrett Motion (NYSE: GTX), a Swiss auto parts manufacturer, filed for a prepackaged Chapter 11 bankruptcy that would include a $2.1 billion sale to KPS Capital Partners. http://axios.link/jvDh

• The Blackstone Group is committing an initial $250 million to form ClearGen, which will own and finance sustainable energy infrastructure assets for commercial, institutional, and industrial clients. http://axios.link/bvxh

🚑 The Carlyle Group agreed to acquire a majority stake in TriNetX, a Cambridge, Mass.-based health research network that’s raised over $100 million in VC funding from firms like MPM Capital, Deerfield Management, and Merck. www.trinetx.com

• The Orogen Group agreed to acquire a majority stake in Westcor, a Maitland, Fla.-based land title insurance company. www.wltic.com

🚀 QuantiTech, a Huntsville, Ala.-based portfolio company of Sagewind Capital, acquired Dynamic Concepts, a provider of engineering and software services for human spaceflight. www.quantitech.com

• Eight companies plan to price U.S. IPOs this week, the largest of which is expected to be a $900 million offering from GoodRx. http://axios.link/ogeN

🚑 Kronos Bio, a San Mateo, Calif.-based biotech focused on undruggable cancer targets, filed for a $100 million IPO. It plans to list on the Nasdaq (KRON) with Goldman Sachs as lead underwriter, and raised over $150 million in VC funding from Omega Funds (10% pre-IPO stake), Vida Ventures (6.9%), Nextech, GV, Perceptive Advisors, Invus and Polaris Partners. http://axios.link/e10K

• SLG Packaging, Thailand’s largest packaging company, plans to raise up to $1.27 billion in what would be the country’s second-largest IPO of 2020. http://axios.link/CJa5

🚑 Spruce Biosciences, a San Francisco-based developer of therapies for rate endocrine disorders, filed for an $86 million IPO. The pre-revenue company plans to list on the Nasdaq (SPBR) with Cowen as lead underwriter, and raised $116 million in VC funding from Novo Holdings (29.1% pre-IPO stake), Omega Funds (11.7%), RiverVest Venture Partners (11.7%), HealthCap (11%), Abingworth Bioventures (9.8%), Rock Springs Capital (6.3%), Aisling Capital (5.9%) and Citadel (5.9%). http://axios.link/9n7V

• Social Capital Hedosophia, led by Chamath Palihapitiya, filed for three new SPAC IPOs, with headline numbers of $350 million, $650 million, and $1 billion. Its first two SPACs agreed to buy Virgin Galactic and Opendoor. http://axios.link/3bzp

• Playboy Enterprises is in talks to go public via a reverse merger with a SPAC, per Reuters. The company is currently backed by Rizvi Traverse Management. http://axios.link/Mpr7

• Empower Ltd., a SPAC formed by private equity firm MidOcean Partners, filed for a $250 million IPO. http://axios.link/4IZd

• FirstMark Horizon Acquisition, a tech-focused SPAC formed by FirstMark Capital, filed for a $300 million IPO. http://axios.link/lkch

🚑 NextGen Acquisition, an industrial and health care-focused SPAC led by Greg Summe (Glen Capital Partners) and George Mattson (ex-Goldman), filed for a $350 million IPO. http://axios.link/Yh7e

🚑 Roche (Swiss: RO) agreed to buy Inflazome, a British developer of inflammasome inhibitors, for €380 million upfront. Inflazome had raised around $80 million from firms like Longitude Partners, Michael J. Fox Foundation, Forbion, Novartis Venture Fund, and Fountain Healthcare Partners. http://axios.link/L3jo

• Iliad (Paris: ILD) agreed to buy listed Polish mobile operator Play for €3.5 billion. http://axios.link/ZYcU

• Rolls-Royce (LSE: RR) said it’s seeing to raise up to $3.2 billion in new capital, with the FT reporting that Singapore sovereign wealth fund GIC may be involved. No word yet on the method, which could include a rights issue, equity offering or debt offering. http://axios.link/k89g

• Saudi Industrial Investment Group and National Petrochemical Co., both Saudi petrochemicals companies, said the are in merger talks. http://axios.link/6fE2

• Societe Generale (Paris: SOGN) plans to seek a buyer for its Lyxor asset management arm, per Reuters. http://axios.link/rBWi

• Kindred Capital, a London-based seed firm, raised £81 million for its second fund. http://axios.link/0Fo5

• Dunston Almeida, a veteran health care biz dev executive, joined Radian Capital as a venture partner, per his LinkedIn profile. www.radiancapital.com

• Steve Brune joined Lyrix Holdings as a partner, per his LinkedIn profile. He previously was a managing director with Greenpoint Capital Management.

🚑 Alexia Pearsall joined Omega Funds as CFO. She previously was CFO at Guidepost Growth Equity. www.omegafunds.com

• Axios' Courtenay Brown writes: "Americans were starting to fall off the rolls of unemployment. But last Thursday's claims report shows the drop-off hasn't just stalled out — the trend continues to reverse course."