Yesterday we discussed about how Fidelity had marked down many of its "venture capital" investments -- including in Bue Bottle, Snapchat and Zenefits -- that are held in its $70 billion Blue Chip Growth Fund. We later took a look at Fidelity's $142 billion Growth Company Fund, and found additional markdowns for companies like Dropbox, MongoDB and Turn (plus markups for certain securities in biotech unicorns like Intarcia and Moderna). You can view all the new data by going here.
It's also probably important to understand how Fidelity generally invests in privately-held companies. Rather than having each mutual fund do its own deals, the firm’s global equity capital markets group — led by Andy Boyd — negotiates an investment with the company, and then asks individual Fidelity portfolio managers if they want an allocation.
Moreover, while Fidelity marks each of its securities to market every single day (including for unlisted companies), the firm does not leave those calculations to portfolio managers (who might have conflicts of interest). Instead, Fidelity utilizes a Fair Value Committee that determines the appropriate price for each security. That means that every Fidelity mutual fund that holds Uber’s Series D stock — there are lots of them — is valuing those shares at the exact same price. One would have to assume that the value of preferred stock vs. common stock is taken into account -- thus actually making most of these markdowns even more notable, since we're discussing preferred shares almost exclusively (although some of the preferred securities, like Snapchat's, are so vanilla as to effectively act like common).
It also is worth noting that no Fidelity mutual fund is allowed to invest more than 10% of their net assets in illiquid securities like startup stock, and are required to take “appropriate steps to protect liquidity” if value appreciation or depreciation threatens to test that threshold.
Finally, I've got to wonder what these markdowns ultimately mean for future mutual fund investments in such companies. Not that Fidelity wouldn't want to keep participating -- its overall private portfolios seem to be in the black -- but do entrepreneurs think the trade-off is worth it? Particularly when they may still be able to access deep-pocketed, later-stage tourists from the hedge fund, sovereign wealth and family office markets.
I floated this question on Twitter yesterday, and had a number of people suggest that the cash far outweighs a tiny bit of PR pain. And, as my colleague Stacey Higginbotham pointed out, there is a decent parallel to all of those VC and PE folks who said they'd stop taking LP commitments from public pensions like UTIMCO, but never followed through (save for a small handful of stalwarts, like Sequoia and Kleiner Perkins).
But there also is a case to be made that each of these companies is in a fierce battle for talent, and stories about markdowns could become deciding factors for popular engineers who would prefer to get options in a company on the upswing, rather than on the wrong side of their unicorn express. Even Facebook faced some hiring troubles in the weeks and months after its IPO, when the stock price sagged. As always, interested in your thoughts...
• Look ma, I'm on the TV: Last night I was on local Boston television, talking about the daily fantasy sports situation (including here in MA, where the AG just called it "gambling," but stopped short of calling for it to be outlawed). Here's the YouTube.
• Have a great weekend... Go Pats!
THE BIG DEAL
• Petco, a San Diego-based pet supplies retailer currently owned by TPG Capital and Leonard Green & Partners, is expecting a takeover offer from CVC Capital Partners and the Canada Pension Plan Investment Board, according to the NY Post.
This would rival an expected joint bid from KKR and Hellman & Friedman, with each believed to be north of $4 billion. Apollo Global Management is also mulling an offer. Petco recently filed for an IPO, reporting $75 million of net income on nearly $4 billion in revenue for the fiscal year ending January 31. Read more.
VENTURE CAPITAL DEALS
• Alphaeon Corp., an Irvine, Calif.-based provider of healthcare and beauty products that works in partnership with physicians, has raised $70 million in Series B funding. The round size was undisclosed in the company's press release, so this figure comes from a source familiar with the situation. Sailing Capital led the round, and was joined by H&S Ventures, Longitude Capital and Chow Tai Fook Enterprises. www.alphaeon.com
• Gainsight, a Redwood City, Calif.-based provider of customer success management software, has raised $50 million in Series D funding. Insight Venture Partners led the round, and was joined by return backers Battery Ventures, Bain Capital Ventures, Bessemer Venture Partners, Salesforce Ventures and Summit Partners. www.gainsight.com
• GetYourGuide, a Berlin-based vacation booking site, has raised $50 million in Series C funding. KKR led the round, and was joined by Sunstone Capital and return backers Spark Capital and Highland Capital Partners. www.getyourguide.com
• CCP Games, an Iceland-based developer of virtual reality games and technology, has raised $30 million in new VC funding. New Enterprise Associates led the round, and was joined by Novator Partners. www.ccpgames.com
• HealthiestYou, a Scottsdale, Ariz.-based telehealth member engagement platform, has raised $30 million in growth equity from Frontier Capital. www.healthiestyou.com
• Unitive, a Woodside, Calif.-based analytics startup that focuses on unconscious bias in hiring and other HR decisions, has raised $7.5 million in Series A funding. Ignition Partners led the round, and was joined by Kapor Capital, Webb Investment Network, Floodgate and Correlation Ventures. www.unitive.works
• RetroSense Therapeutics, an Ann Arbor, Mich.-based developer of gene therapies designed to restore vision in patients suffering from blindness due to retinitis pigmentosa, has raised $6 million in Series B funding from RBV Capital, ExSight Capital, and Santen Pharmaceutical Co. and return backer BlueWater Angels. www.retro-sense.com
• Rhumbix, a San Francisco-based “mobile platform designed for smarter construction sites,” has raised $6 million in Series A funding. Greylock Partners led the round, and was joined by Brick & Mortar Ventures, UJ Ventures and Ray Levitt. www.rhumbix.com
• Appcast, a Lebanon, N.H.-based pay-per-applicant job ad exchange, has raised $5 million in new VC funding. Point Judith Capital led the round, and was joined by IrishAngels and return backer Baird Capital. www.appcast.io
• Huuuge Inc., a Palo Alto, Calif.-based mobile free-to-play social casino, has raised $4 million in Series A funding led by Korea Investment Partners. www.huuuugegames.com
• RootsRated.com, a Chattanooga, Tenn.-based outdoor media platform, has raised $2.5 million in Series A funding. No investors were identified. www.rootsrated.com
PRIVATE EQUITY DEALS
• Apollo Global Management has agreed to acquire RegionalCare Hospital Partners, a Brentwood, Tenn.-based owner and operator of eight non-urban hospitals, from Warburg Pincus. No financial terms were disclosed, but an earlier Bloomberg report suggested that RegionalCare could be valued at around $800 million. www.regionalcare.net
• BC Partners has agreed to acquire Italian restaurant chain Cigierre at an enterprise value of around €300 million. Sellers include L Capital Partners and Paladin Capital Management. www.cigierre.com
• Cerberus Capital Management has acquired £13 billion worth of Northern Rock mortgages from the British government, and then sold some of them to TSB Banking Group. Read more.
• Flexpoint Ford has acquired a minority equity stake in Service Finance Co., a Boca Raton, Fla.-based originator and underwriter of services financing for home improvement and solar projects. No financial terms were disclosed. www.svcfin.com
• Hellman & Friedman is exploring a bid for Argus Media, a London-based provider of commodity markets pricing information, according to Dow Jones. Closely-held Argus said earlier this week that it had hired BoA Merrill Lynch to explore strategic options. Read more.
• Veritas Capital Management is in talks to acquire the U.S. manpower and services businesses of BAE Systems PLC (LSE: BA) for more than $1 billion, according to Reuters. Read more.
• Warburg Pincus is planning to bid for T-Mobile Netherlands, which currently is owned by Deutsche Telekom, according to Reuters. Earlier this year, Warburg Pincus hired former Deutsche Telekom CEO René Obermann. Read more.
• Dometic, a Swedish maker of refrigerators and other products for boats and other leisure vehicles, said it could be valued at upwards of $1.7 billion in an IPO later this month. The company is owned by EQT Partners, and is working on the float with Morgan Stanley, SEB and Jefferies. Read more.
• LoanDepot, a Foothill Ranch, Calif.-based consumer lending platform owned by Parthenon Capital, has postponed plans for what could have been a $540 million IPO, citing "market conditions." Read more.
• Xtera Communications Inc., an Allen, Texas-based provider of optical transport solutions, raised $25 million in its IPO. The company priced 5 million shares at $5 per share, compared to plans to offer 5.5 million shares at between $9 and $11 each. Its initial market cap is $85.55 million, and the company will trade on the Nasdaq under ticker symbol XCOM. Needham & Co. was listed as left lead underwriter. Xtera reports a $10 million net loss on around $43.6 million in revenue for the first nine months of 2015. It had raised over $100 million in VC funding, from firms like New Enterprise Associates (23.4% pre-IPO stake), The Wellcome Trust (15.5%), ARCH Venture Partners (13.1%), Sevin Rosen Funds (8.3%) and VantagePoint Capital Partners (6.2%). www.xtera.com
• Direct Energy, a Houston-based subsidiary of Centrica PLC (LSE: CNA), is acquiring Panoramic Power, an Israeli startup that uses sensors and software to monitor the energy use of businesses, for $60 million. Panoramic Power had raised VC funding from firms like Greylock, Autodesk Ventures, Marker Ventures and Qualcomm Ventures. Read more.
• First Century Utilities LLC has acquired GridPoint, an Arlington, Va.-based provider of energy management solutions for the commercial, light industrial and utility markets. No financial terms were disclosed. GridPoint had raised well over $100 million in VC funding from firms like Goldman Sachs, NEA, Susquehanna Private Equity Investments, Perella Weinberg and Robeco Group. www.gridpoint.com
• Fossil Group (Nasdaq: FOSL) has agreed to acquire Misfit, a Burlingame, Calif.-maker of wearables and sleep trackers, for $260 million. Misfit had raised over $60 million in VC funding from firms like Founders Fund, GGV Capital, Horizons Ventures, JD.com, Khosla Ventures, Norwest Venture Partners, OATV, Xiomai and TenOneTen Ventures. Read more.
• TowerBrook Capital Partners is meeting with banks to explore strategic options for apparel retailer J. Jill Group, just six months after acquiring it, according to Bloomberg. One possibility could be an IPO in Q2 2016. Read more.
• China National Chemical is in talks to acquire Syngenta (SWX: SYNN), a Swiss chemicals company valued at $42 billion, according to Bloomberg. This comes just months after Syngenta fended off a $46 billion takeover offer from Monsanto (NYSE: MON) but, if successful, would become the largest-ever acquisition by a Chinese company of a foreign target. Read more.
• General Electric is entering exclusive talks to sell its Japan leasing business to Sumitomo Mitsui Financial Group for more than $4.5 billion, according to the WSJ. Read more.
• Hulu is “seeking to sell” an equity stake to Time Warner (NYSE: TWX), in a deal that would value the video streaming service at between $5 billion and $6 billion, according to the WSJ. Hulu’s current owners are Walt Disney Co., 21st Century Fox and Comcast. Read more.
• Mylan (Nasdaq: MYL) appears to have failed in its attempt to buy Irish drug-maker Perrigo (NYSE: PRGO) for $27 billion in cash and stock, after falling to get 50% of Perrigo shareholders to tender their stock. Perrigo’s board had asked shareholders to reject the offer, saying it undervalued the company. Read more.
• PayPal (Nasdaq: PYPL) has completed its previously-announced $890 million acquisition of Xoom Corp., a San Francisco-based provider of digital money transfer services. As part of the deal closing, Xoom has delisted from the Nasdaq. www.xoom.com
FIRMS & FUNDS
• The Blackstone Group has agreed to acquire around a $3 billion real estate fund portfolio from the California Public Employees’ Retirement System (CalPERS). Read more.
• EIG Global Energy Partners, a Washington, D.C.-based provider of mezzanine financing to energy companies, has launched a senior loan strategy, according to LBO Wire. www.eigpartners.com
• White Star Capital, a seed and early-stage investment firm focused on North America and Europe, has closed its first fund with $70 million in capital commitments. Limited partners include Business Development Bank of Canada, Isomer Capital and Swen Capital Partners. Read more.
MOVING IN, UP, ON & OUT
• Aaron Batalion, co-founder and the first CTO of LivingSocial, has joined Lightspeed Venture Partners as a partner. www.lsvp.com
• HarbourVest Partners has promoted Nate Bishop, Carolina Espinal and Aris Hatch to managing directors. www.harbourvest.com
• Ashley Mayer is joining venture firm Social+Capital Partnership as head of brand and talent. She previously spent the past six years leading communications at Box. www.s23p.com
• Paul Walsh, the former CEO of Diageo PLC, has agreed to join the board of British bank HSBC, effective in January. Former AXA chairman and CEO Henri de Castries will join the HSBC board in March. Read more.
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