IPO POWER STRUGGLE
Good morning, Term Sheet readers.
It’s Spotify’s day. The music streaming company’s public debut on the New York Stock Exchange this morning will make history no matter what happens.
Yesterday, CEO Daniel Ek said, “Spotify has never been a normal kind of company.” Rather, his company is pursuing a direct listing, making it the first large, high-profile company to do so. Everyone will be watching closely today as this IPO cuts out the traditional roadshow process and many of the traditional Wall Street investment bankers and fees that come along with it.
In preparation for its direct listing, Spotify also waived its right of first refusal on private secondary share sales to facilitate increased transaction volume. From these trades, Spotify and its advisers are receiving vital information about investor sentiment and a more up-to-date market valuation than the typical private company, according to PitchBook.
Term Sheet recently spoke with Spotify’s very first investor, Pär-Jörgen Pärson, a general partner at Swedish growth investment firm Northzone. To him, success on the first day of trading is not “a crazy pop.” He added: “It’s that it’s a solid support for the share and probably a double-digit price increase, but not a whole lot more than that.”
Analysts are predicting that Spotify could soon be valued at more than $20 billion, but Ek is asking employees, investors and observers to manage expectations. “Remember, tomorrow is just another day in our journey to fulfill our mission,” he wrote.
Depending on how the first day of trading goes, could we expect other unicorns to follow suit? Don’t hold your breath. “For huge market cap, household names with cash-efficient models that don’t need to raise external capital, I absolutely think it could be a right fit,” Pärson said. “But there are very few companies who have all of those characteristics.”
More importantly, what Spotify is doing is challenging the notion that founders need bankers’ full array of services to go public. Depending on how today goes, we’ll know the answer. I like how Recode’s Teddy Schleifer put it:
If the direct listing is successful, then the push-and-pull power struggle between Silicon Valley and Wall Street would shift more toward the former. More and more highly-valued startups could think that they, too, do not need Wall Street’s usual fare in order to become a public company, and investment bankers could have a tougher time pitching their services to CEOs.
In the end, it’s all about power.
THE LATEST FROM FORTUNE…
• J.P. Morgan Blockchain Chief Heads Out for Her Own Business (by Robert Hackett)
• Spotify CEO Peps Up Employees Ahead of IPO (by Aric Jenkins)
• GM Is the First Automaker to Report Sales on a Quarterly Basis (by Hallie Detrick)
… AND ELSEWHERE
Disney could buy Sky News. The regulatory worries of mega-funds. Allergan weighs options for women’s health unit. Meituan Dianping is reportedly in talks to buy Mobike for $3.7 billion. SEC cracks down on Mayweather-backed ICO. Google SVP of Engineering leaves. Goldman Sachs faces the music on gender discrimination pay.
• SiFive, a San Francisco-based commercial processor IP provider, raised $50.6 million in Series C funding led by existing investors Sutter Hill Ventures, Spark Capital, and Osage University Partners, and was joined by investors including Chengwei Capital, and strategic investors including Huami, SK Telecom, and Western Digital.
• SalesLoft, an Atlanta-based sales engagement platform, raised $50 million in Series C funding. Insight Venture Partners led the round and was joined by investors including LinkedIn, and Emergence Capital.
• BitPay, an Atlanta-based blockchain payments provider, raised $40 million in funding. The investors included Aquiline Capital Partners, Menlo Ventures, Capital Nine, G Squared, Nimble Ventures (an affiliate of Passport Capital), and Delta-v Capital.
• Bitmo, the Carlsbad, Calif-based social gifting app, raised $1.5 million of $4.3 million planned, according to a filing with the SEC.
HEALTH AND LIFE SCIENCES DEALS
• Macrolide Pharmaceuticals, a Watertown, Mass.-based antibiotics maker focused on drug-resistant infections, raised $20 million in funding. Advent Life Sciences, Gurnet Point Capital, Novartis Venture Fund, Roche Ventures, and SR One led the round.
PRIVATE EQUITY DEALS
• Veritas Capital, the New York-based private equity firm, agreed to acquire GE Healthcare‘s Value-Based Care Division for $1.1 billion in cash. The transaction is expected to close in the third quarter of 2018.
• Hydromax USA, backed by Warren Equity Partners, acquired New Brighton, Penn.-based Miller Pipetech‘s technical services division. Financial terms weren’t disclosed.
• Anvil International, a portfolio company of One Equity Partners, acquired the assets of FlexHead Industries and SprinkFlex, Holliston, Mass.-based firms that make fire safety system fittings. Financial terms weren’t disclosed.
• MedBridge, a Seattle-based health provider education platform, raised an undisclosed amount of funding from LLR Partners. Financial terms weren’t disclosed.
• Niteo Products, a portfolio company of Highlander Partners., announced acquired the air care assets of Kraco Enterprises, a Compton, Calif.-based automotive car product maker. Financial terms weren’t disclosed.
• Classic Fashion Apparel Industry, an Irbid, Jordan-based clothing manufacturer, raised an undisclosed amount from NBK Capital Partners and Gulf Capital. Financial terms weren’t disclosed.
• Great Hill Partners recapitalized Vatica Health, a Nashville-based healthcare tech firm. Financial terms weren’t disclosed.
• Zuora, a San Mateo, Calif.-based cloud subscription management platform, said it plans to raise $100 million in an IPO of 10 million shares priced between $9 to $11 a piece. The firm posted revenue of $167.9 million for the 12 months ending Jan. 31, and loss of $46.2 million. Benchmark Capital (11.1% pre-offering), Redpoint Omega (6.5%), Shasta Ventures (8.3%), Tenaya Capital (6.6%), and Wellington Management Company (9.4%) back the firm.. Goldman Sachs, Morgan Stanley, Allen & Company and Jefferies are joint bookrunners in the deal. The firm plans to list on the NYSE as ”ZUO.” Read more.
• Goosehead Insurance, a Westlake, Texas-based insurance firm, filed to raise $100 million in an IPO. J.P. Morgan and BofA Merrill Lynch are underwriters in the deal. It plans to list on the Nasdaq as “GSHD.” Read more.
• GreenSky, an Atlanta-based fintech, filed confidentially for an IPO, the Wall Street Journal reports. Read more.
• EnergyAustralia completed its acquisition of Ecogen Energy, a power station operator, from IFM Investors for A$205 million ($157.36 million).
• Canada Pension Plan Investment Board agreed to acquire the wind and solar assets of NexEra Energy Partners, a Juno Beach, Fla.-based renewable energy firm, for $582.3 million.
• PNC Riverarch Capital agreed to acquire a stake in Tranzonic, a Cleveland-based a supplier of cleaning products, from Silver Oak Services Partners. Financial terms weren’t disclosed.
• Francisco Partners agreed to acquire Bomgar from Thoma Bravo. Financial terms weren’t disclosed.
• GenNx360 Capital Partners agreed to acquire Subsea Global Solutions, a Miami-based underwater ship maintenance firm, from Lariat Partners. Financial terms weren’t disclosed.
• Lone Star, a private equity firm, is weighing the sale of its stake in GTC, a Polish real estate firm, Reuters reports. Read more.
FIRMS + FUNDS
• Kelso Investment, a New York-based private equity firm, is seeking to raise $3.5 billion for its tenth fund, according to a filing with the SEC.
• Evolution Credit Partner, a Boston-based fund, plans to raise $1.5 billion for its first fund, according to an SEC filing.
• Merit Capital Partners, a Chicago-based private equity firm, closed its sixth fund at $536 million, above its $500 million target.
• Sinovation Ventures, a San Francisco-based early-stage venture firm, plans to raise $500 million for its fourth fund, according to an SEC filing.
• Social Capital, the Palo Alto-based private equity firm, plans to raise $1 billion in its new fund, according to a filing with the SEC.
• Eclipse SPV, a Palo Alto-based firm, $190 million for its first fund, according to an SEC filing.
• Cloud Apps Capital Partners, a San Francisco-based venture capital firm, raised $66.7 million toward a $100 million second early stage fund, according to an SEC filing.
• Razor’s Edge Ventures, a Reston, Va.-based venture firm, plans to raise $63.5 million for its II-A fund, according to an SEC filing.
• Roelof Opperman and Vik Chawla were named principals, while KC Cleary was named partner at venture capital firm Fifth Wall Ventures.
• Steven Hu was rehired as partner at Chinese venture firm Qiming Venture Partners.
• Hamilton Lane announced seven promotions to principal.