UBER MARKDOWNS: The daily headlines of new drama at Uber slowed down in July, but that doesn’t mean the company is in recovery mode yet. Reports over the weekend painted an ugly picture of a leaky board struggling to hire a CEO, an ousted CEO who can’t stop meddling, and a rudderless company without a leader.
Inside the company, employees are speculating that Uber gets sold for a fraction of its valuation by the end of the year. Or maybe SoftBank will team up with Kalanick to buy back the company! It would be a nutty move, but certainly not SoftBank CEO Masayoshi Son’s craziest. (As for Kalanick’s plan to pull a “Steve Jobs” and return in a blaze of glory, let us not forget how that worked out for Mark Pincus and Jack Dorsey.)
In the meantime, Uber’s mutual fund investors have now decided the company is less valuable after all the drama. Fortune’s Jen Wieczner reports:
After T. Rowe Price wrote down the value of its Uber stock by 5% in May, other mutual funds slashed the valuation of their own stakes following Kalanick’s resignation in June, new disclosures show.
Vanguard, whose $7.5 billion U.S. Growth Fund owns shares in Uber, cut the value of its position by 15% in June, the first time the fund giant has marked down the taxi startup’s valuation in the three years it has owned it. The Hartford also lowered the value of its Uber stock by 15% in the three funds that hold it, as did the $2.8 billion Principal Global Multi-Strategy fund, which is overseen in part by Wellington Management.
It’s the first indication that Uber’s problems, from a sexual harassment scandal to an intellectual property lawsuit with Waymo, are taking a significant and widespread toll on its stock price. Uber, as a private company, does not have publicly-traded shares on the stock market, and therefore it’s up to the mutual funds’ discretion to assign a so-called fair market value to the stock.
Another Principal fund, the $7.5 billion Principal LargeCap Growth I fund managed by T. Rowe Price, marked down its Uber stake by about another 8%, a total reduction of more than 12% since April.
While the markdowns do not necessarily reflect the going price for Uber stock on the private market—and were not universal among funds that own Uber—the consistency among at least three different firms, cutting the value of their shares by exactly the same amount (to about $41 a share), points to a prevailing view among portfolio managers.
They come at a time when the only major changes at the company were Kalanick’s departure, and a stated commitment to improve the company’s culture and eliminate harassment (an announcement that’s unlikely to negatively impact Uber’s stock price). In determining the fair market value of private stock, Vanguard, for its part, takes into account “offering price, financial performance of the company, the performance of comparable companies and corporate actions,” a spokesperson says.
The reductions also represent sizable paper losses for the funds. Between the Hartford Capital Appreciation fund, which has $8.5 billion in assets under management, and the $4.5 billion Hartford Growth Opportunities Fund, Uber accounted for more than $30 million in losses in June alone, according to the new disclosures (released at the end of the following month). Vanguard, meanwhile, which has a smaller position in the car-hailing company, took a loss of more than $10 million.
Meanwhile BlackRock, which does not report its portfolio holdings each month, disclosed in a recent quarterly filing that it marked up the value of its Uber stock by more than 8% in the three months ended May 31, the second time this year it has raised its valuation on the company. By BlackRock’s estimation, that puts Uber’s stock price at nearly $57 a share, though it’s possible that the asset manager was merely accounting for the rise in the overall stock market during the same period. Read more here.
SNAP: The company’s share lockup for early investors expired yesterday and its stock ended the day down 1%. Employees won’t get to sell for another two weeks.
Meanwhile the S&P 500 announced it will exclude Snap from its index on account of its three-class share structure. This follows the FTSE Russell’s decision to do the same.
This means that even though Snap ignored investor complaints about its non-voting share structure, the indexes did not. Back in February the Council of Institutional Investors sent a letter to Snap urging the company to reconsider its share no-vote structure. I wrote at the time:
The kneejerk defense here is “Don’t like it? Don’t buy.” But because companies of Snap’s size will be included in major stock indexes, many investors won’t be able to avoid it.
It also begs the question of whether investors will ever be able to pick and choose which parts of index funds they want to own. (The S&P 500, minus Snap, for example.)
The indexes just made that judgment call on behalf of investors. It sends a powerful message to startups with supershares and board structures that give their founders total control. The only problem is it’s not exactly consistent: Facebook, which has three classes of shares, and Alphabet, which has two, remain on the index.
MEANWHILE: VC “confidence,” as measured by a survey by University of San Francisco professor Mark Cannice, remains steady at 3.83 on a scale of one to five. Cannice has done this survey for the past 52 quarters; 3.83 is steady with last quarter and slightly above the 13-year- average.
The notable thing that has happened is that the reasons behind the confidence shifted: Last year, VC’s were most concerned about macro issues like political uncertainty. In the first quarter, they shifted back to traditional venture worries like the rate of innovation, new market opportunities, and exit expectations.
This survey only covers the first quarter. I’m guessing that certain events – Uber meltdown, Snap IPO, sexual harassment scandals – will cause a second-quarter drop in VC confidence.
UNICORN WATCH: Reddit has raised $200 million in a new round of funding the values it at $1.8 billion (more details below). Who says there are no more investment opportunities in consumer Internet?
Reddit is a consumer Internet anomaly that never quite struggled, per se, but has existed in a Peter Pan Neverland for years. The site looks like a 90’s message board. Basic functions like search barely work. It gets 80% of its traffic from desktop visitors. It hosts some of the most vile content on the Internet, despite an “Anti-Evil” team of engineers working to weed out trolls. And while it has a modest advertising business, the company doesn’t put much effort into making money.
In an interview with Recode, CEO Steve Huffman said the company had a lot of “perception debt” which is an… interesting way of putting it.
Despite the “debt,” Reddit has 300 million monthly visitors. The company and its investors believe that with some simple product enhancements, it has a shot at getting to 1 billion.
One hitch: Those 300 million visitors know and love Reddit in all its confusing, ugly, difficult-to-use glory. They are vocal about that. And prone to outrage. The biggest challenge with any consumer Internet product is evolving to appeal to a larger audience while keeping your core users happy. (See also: Twitter.)
Reddit knows this better than anyone. In an AMA interview with Huffman, one user begged: “Please please please for the love of God don't pull a Digg,” a reference to the time Reddit’s Web 2.0 rival Digg launched a redesign that was so unpopular it caused users to revolt. The site never really recovered from it. “Why not?” Huffman joked in response. “Digg4 was the best thing that ever happened to Reddit.“
MOOCH: Anthony Scaramucci will not become the White House communications director, a job he was scheduled to officially start in mid-August. He does not currently have another White House role.
What does this mean for the deal to sell his firm, SkyBridge Capital, to HNA Group for $250 million?
That deal was announced in January but hasn’t closed yet due to regulatory scrutiny from the Committee on Foreign Investment in the U.S. There were questions over whether the deal’s approval would look like favoritism from the Trump administration. Now, if the Mooch exits politics entirely, he may have a chance to call the deal off and return to the private sector. (And yes, plenty of Twitter jokesters have suggested he apply for the Uber CEO job. After all, he’s shown a willingness to take a job few others want…)
OUT: Mike Abbott has left Kleiner Perkins, the firm said Monday. Abbott, a general partner since 2011, wrote in a blog post that he wants to go back to operating. (He previously was VP of engineering at Twitter.) “Ultimately, my desire to discover and invest in the next new thing became eclipsed by my desire to get my hands dirty again and build the next new thing,” he wrote, naming AR, AI and cybersecurity as areas of interest.
Partner Ted Schlein commented: "Mike has been a great partner during his time at Kleiner Perkins. We wish him much success in his future endeavors."
Abbott was part of Edge, the firm’s seed-stage investing program. That program wound down in December. As a result, Anjney Midha, Roneil Rumburg and Ruby Lee also left the firm.
A firm spokesperson noted that Edge was not a separate fund but more of a marketing strategy for its seed investing effort. The money for Edge came from the firm’s 16th main fund. Kleiner Perkins continues to actively make seed stage investments and has done 6 seed deals since it wound down Edge in December, the spokesperson said.
THE LATEST FROM FORTUNE...
• Can Sarahah, another anonymous messaging app, survive the trolls?
• The Elon Musk Hyperloop is mostly hype.
• Britain could lose 40,000 investment bankers after Brexit.
• Coinbase faces backlash and legal risk over Bitcoin cash.
• Republicans want net neutrality input from the tech bigs.
Why women aren’t CEOs. A fake sexual harassment accusation. The great corn clash. Layoffs at Whisper. Robo-advisors can have conflicts of interest.
• Reddit, a San Francisco-based online content platform, raised $200 million in funding at a $1.8 billion valuation. Investors include Andreessen Horowitz, Sequoia Capital, Coatue Management, Vy Capital, Fidelity, Sam Altman, and Ron Conway. Read more at Fortune.
• Volocopter, a Germany-based flying air taxi developer, raised $30 million in funding from Daimler.
• Booster, a Burlingame, Calif.-based company that delivers gas directly to your car, raised $20 million in Series B funding. Conversion Capital led the round, and was joined by investors including Madrona Venture Group, Maveron, Version One, Perot Jain LP and RRE Ventures.
• UnifyID, a San Francisco-based identity application developer, raised $20 million in Series A funding. NEA led the round, and was joined by Andreessen Horowitz, Stanford-StartX, and Accomplice Ventures.
• NextBlock Global, a Toronto-based digital asset investment company, raised $20 million in funding. The investors were not named.
• Flutterwave, a San Francisco-based provider of modern payments infrastructure for banks and businesses in Africa, raised more than $10 million in Series A funding. Greycroft Partners and Green Visor Capital led the round, and were joined by investors including Y Combinator and Glynn Capital.
• Lost My Name, a London-based publisher of personalized story books for children, raised $8.5 million in Series B funding, according to TechCrunch. Ravensburger led the round, and was joined by investors including Google Ventures, Project A Ventures, Greycroft, The Chernin Group, and Allen & Co. Read more.
• Namogoo, an Israel-based startup specializing in eradicating malware from e-commerce web sites, raised $8 million in a Series A funding. GreatPoint Ventures led the round, and was joined by Blumberg Capital and Inimiti Capital. Read more at Fortune.
• Atlas Dynamics, a Latvia-based provider of drone-based solutions, raised $8 million in funding. The investors were not named.
• CommonSense Robotics, an Israel-based on-demand fulfillment technology startup, raised $6 million in seed funding. Investors include Aleph VC and Innovation Endeavors.
• Carspring, a U.K.-based used car buying platform, raised £5 million ($6.6 million) in Series B funding. Investors include Rocket Internet and Channel 4’s Commercial Growth Fund.
• Sawyer, a Brooklyn-based children’s class-booking startup, raised $6 million in funding. Advance Venture Partners led the round, and was joined by investors including Chan Zuckerberg Initiative, 3311 Ventures, Collaborative Fund, and Female Founders Fund. Read more at Fortune.
• Kin Insurance, a Chicago-based home insurance startup, raised $4 million in funding, according to TechCrunch. Investors include Commerce Ventures, Omidyar Network, 500 Startups, Chicago Ventures and Portag3 Ventures. Read more.
• Bitrise, a London-based platform for app developers, raised $3.2 million in Series A funding, according to TechCrunch. OpenOcean led the round, and was joined by investors including Y Combinator and Fiedler Capital.
• Peer5, a San Francisco and Tel Aviv-based content delivery network operator, raised $2.5 million in seed funding. Investors include FundersClub, Oriza Ventures, Tank Hill Ventures and Leorsa Group.
• Datarino Group, a Poland-based creator of a behavioral targeting platform, raised $1.6 million in Series A funding from Luma Ventures.
• ShowClix Inc, a Pittsburgh-based provider of full-service event ticketing, raised funding of an undisclosed amount from Providence Strategic Growth.
• Taxify, an Estonia-based taxi software startup for fleets and drivers, raised funding of an undisclosed amount from Didi Chuxing.
HEALTH AND LIFE SCIENCES DEALS
• CerSci Therapeutics, a Dallas, Texas-based developer of non-opioid analgesics raised $4 million in Series A funding. Investors include Hiawatha Education Foundation.
PRIVATE EQUITY DEALS
• Vista Equity Partners completed its previously announced buyout of Xactly, a San Jose, Calif.-based provider of cloud-based incentive compensation solutions, for approximately $564 million, according to PE Hub.
• PineBridge Structured Capital invested $85 million in Joerns Healthcare, a Charlotte, N.C-.based manufacturer and service provider of patient handling and wound care products.
• DG3 acquired Leycol Printers Limited, a London-based provider of high-end offset and lithographic printing service for the financial and commercial print market. Financial terms weren’t disclosed.
• Centre Partners made an investment of an undisclosed amount in Golding Farms Foods, a Winston Salem, N.C.-based manufacturer of sauces and condiments. Financial terms weren’t disclosed.
• Cordental Group, a portfolio company of New MainStream Capital, acquired Konikoff Family Dentistry, a Norfolk, Va.-based dental health services provider. Financial terms weren’t disclosed.
• Marlin Equity Partners agreed to buy ABIT Europe Group, a German and Dutch provider of debt management software solutions. Financial terms weren’t disclosed.
• Hospitality Staffing Solutions, a portfolio company of Littlejohn Capital, has acquired DEZ Staffing, a Denver-based provider of hospitality and industrial staffing services. Financial terms weren’t disclosed.
• Schroders acquired Adveq, a Switzerland-based private equity-focused asset manager. Financial terms weren’t disclosed. As part of the deal, Adveq has been renamed Schroder Adveq.
• Sumeru Equity Partners acquired MDSL, a New York City-based provider of technology expense management solutions. Financial terms weren’t disclosed.
• SoftBank Group Corp is considering an acquisition offer for Charter Communications Inc (Nasdaq:CHTR), according to Reuters. Charter has a market capitalization of more than $100 billion and another $60 billion in debt. Read more.
• The Madison Square Garden Company (NYSE:MSG) acquired a controlling interest in Counter Logic Gaming, an Arcadia, Calif.-based e-sports company. Financial terms weren’t disclosed.
• AES Corp and Alberta Investment Management Corp acquired sPower, a Salt Lake City, Utah-based owner, operator and developer of utility scale solar assets in the U.S. for approximately $1.6 billion. The seller was Fir Tree Partners.
• Clayton, Dubilier & Rice acquired Capco, a Belgium-based business and tech consultancy, from FIS, for $469 million.
• Sun Capital Partners is weighing a sale of restaurant chain Boston Market Corp, according to Bloomberg. Boston Market could fetch about $400 million in a sale. Read more.
• RCI, a division of the Wyndham Hotel Group, acquired Love Home Swap, a London-based platform that enables people to exchange and rent their homes, for approximately £40 million (just under $53 million) in cash, according to TechCrunch. Love Home Swap had raised funding from investors including MMC Ventures. Read more.
• LogMeIn acquired Nanorep, an Israel-based developer of chatbots and other AI-based tools. LogMeIn is paying $45 million plus up to $5 million more in earn-outs over the next two years. Nanorep had raised more than $6 million in venture funding from investors including Titanium Investments, Oryzn Capital, JAL Ventures, iAngels, and OurCrowd.
• Anju Software Inc, a portfolio company of Providence Equity Partners, acquired ClinPlus, a provider of products used for the performance of clinical trials. The seller was DZS Software Solutions Inc. Financial terms weren’t disclosed.
Warburg Pincus agreed to acquire Service Logic, a Charlotte, N.C.-based provider of aftermarket maintenance, repair and replacement services for commercial HVAC equipment. The seller was Sterling Investment Partners. Financial terms weren’t disclosed.
• Facebook acquired Ozlo, a Palo Alto, Calif.-based developer of an intelligent assistant for iOS and the web. Financial terms weren’t disclosed. Ozlo had raised approximately $14 million in venture funding from investors including Greylock Partners, AME Cloud Ventures, and Jerry Yang.
• The owners of D.C. United, a Washington D.C.-based Major League Soccer team, are weighing a sale of the franchise, according to The New York Times. Read more.
FIRMS + FUNDS
• Union Park Capital, a Boston-based private equity firm, is seeking to raise $150 million for its second fund, according to an SEC filing.
• 500 Canada, the Canadian fund operation of 500 Startups, is folding and will not make any new investments following recent sexual misconduct allegations involving co-founder Dave McClure, according to TechCrunch. Read more.
• Catalyst Investors hired Samantha Lexton as senior associate of investor relations, and Jackson Evans and Kirk Mahoney as associates. It also promoted Mia Hegazy to vice president and Kapil Desai to senior associate.
• Roumi Zlateva joined Lovell Minnick Partners as a vice president. Previously, Zlateva was at UBS Securities.
• Brian Miazga joined NXT Capital as a managing director of the West region for its corporate finance group. Previously, he was at CIT.
• Michael Fizzell joined Altas Partners as a principal. Previously, Fizzell was at Onex Partners.
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Polina Marinova produces Term Sheet, and Lucinda Shen compiles the IPO news. Send deal announcements to Polina here and IPO news to Lucinda here.