Evergrande is in trouble. But it probably won’t be a Lehman moment
It’s certainly eye-catching, but concerns that the collapse of Chinese property giant Evergrande will be Lehman Brothers 2.0 currently appear overblown.
Here’s some background: As Term Sheet highlighted last week, investors around the world have grown increasingly concerned over whether the indebted and troubled Evergrande, a Fortune Global 500 company, could spark a wider shock to the global economy. The worries only grew over the weekend as Dow futures sank as the anxieties over the company defaulting on its enormous $300 billion in estimated debt spread, tanking Evergrande’s own valuation from $24 billion to $5 billion in Hong Kong.
What I didn’t get to last week: So intense was the panic that the story has even sparked comparisons to Lehman Brothers, the overleveraged titan of finance whose failure has become synonymous with the Financial Crisis.
But there are a lot of reasons to pause the panic and take a breath. Yes, the Evergrande story is troubling, don’t get me wrong. But analysts are skeptical that this will be the freefall that Lehman became. For starters, Evergrande poses a systemic risk to the Chinese economy, meaning the country will likely step in to lend a hand. Though the question here, as it was a week ago, is still what that will look like.
“There’s a list but one of the biggest differences is of course the Treasury and Federal Reserve decided not to bail out Lehman and didn’t understand the consequences of that failure,” says Ed Yardeni, an economist, to Term Sheet. “This time around we’ll see how the Chinese government plays it out but it is reasonable to expect that they will jump in here.”
Separately, the collapse of Lehman also led to a quick loss of confidence in part because it was around the poorly understood asset class of mortgage-backed securities. For now at least, Evergrande’s issues stem from bank loans and wealth products—products that are more entrenched.
Yardeni isn’t the only one who thinks the Lehman example is overblown: Here is Bruce Pang, head of macro and strategy research at China Renaissance Securities, noting that the government is likely to help in a managed collapse. Also Societe Generale economists led by Wei Yao noting that “avoiding a systemic liquidity squeeze is the absolute priority for the PBOC.”
Yes, the Evergrande saga could have broader implications on the Chinese real estate sector as an estimated 70%-80% of Chinese household wealth is tied up to the property market, per my colleague, Grady McGregor. That could deepen what appears to be an existing slowdown in the country’s economy and push even more investors away from the country.
But comparisons to the uncontrolled spiral that Lehman faced appears for now to be an exaggerated nightmare scenario.
LIEW STEPS BACK AT LIGHTSPEED: Jeremy Liew, who put Lightspeed Venture Partners on the map as a consumer venture investor, is stepping back from his investing role at the firm.
“After a great run of successful investing,” a Lightspeed representative wrote in a tweet Friday, “@JeremySLiew will focus on supporting existing portfolio companies and developing the next generation of out team in our next fund cycle.”
Nicole Quinn, Alex Taussig, Mercedes Bent, and Amy Wu now make up the firm’s core consumer investing partners.
GET YOUR GOOGLE DOCS READY Fortune’s annual Impact 20 focuses on startups that are doing well by doing good: They’re using the creative tools of business to help the planet and tackle society’s unmet needs—and they’re earning a profit while doing so. You can see last year’s honorees here. We’re asking for your nominations through this Google form.
This year’s list will publish on October 25, and the deadline for applications is Sept. 30.
Jessica Mathews compiled the IPO and SPAC sections of this newsletter.
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- Rebellion Defense, a New York City-based developer of A.I. defense solutions, raised $150 million in Series B funding at a $1 billion pre-money valuation. Insight Partners and Venrock led the round.
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- Airwallex, an Australian fintech focused on businesses raised $200 million in Series E funding, valuing it at $4 billion. Lone Pine Capital led the round.
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- air up, a German refillable, flavored water company, raised about €40 million. Five Seasons Ventures, PepsiCo, Ippen.Media, and Oyster Bay led the Series A.
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- Caresyntax, a Boston-based digital surgery platform, raised an additional $30 million in Series C funding. PFM Health Sciences led the round and was joined by investors including BlackRock, ProAssurance, Harmonix, the Relyens Group, and IPF Partners.
- Bright Money, an India-based fintech, raised $30 million in funding. Sequoia Capital India, Falcon Edge Capital, and Hummingbird Ventures invested.
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- Othram, The Woodlands, Texas-based maker of genomics tech for investigators to crack unsolved law enforcement cases, raised $18 million in Series B funding. Gigafund led the round.
- Altana AI, a New York-based supply chain A.I. startup, raised $15 million in Series A funding. GV (formerly Google Ventures) led the round and was joined by Floating Point, Ridgeline Partners,Amadeus Capital Partners, and Schematic Ventures.
- Near Space Labs, a Brooklyn-based geospatial intelligence company, raised $13 million in Series A funding. Crosslink Capital led the round and was joined by investors including Toyota Ventures, Leadout Capital, and Wireframe Ventures.
- Flippa, an Austin-based marketplace to buy and sell online businesses, raised $11 million in Series A funding. OneVentures led the round.
- Saqara, a French startup focused on the construction industry, raised a further $10.6 million in Series A funding led by A/O PropTech.
- 9am.health, a San Diego-based virtual diabetes clinic, raised $3.7 million in seed funding. Investors included Founders Fund, Define Ventures, Speedinvest, and iSeed Ventures.
- Membrion, a Seattle-based maker of ceramic desalination membranes, raised $6 million in Series A funding. Bellingham Angel Investors led the round.
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- Aircover, a San Mateo, Calif.-based platform for sales teams, raised $3 million in seed funding. Defy Partners led the round and was joined by investors including Firebolt Ventures, Flex Capital, and Ridge Ventures.
- Journey Clinical, a New York City-based psychedelics company, raised $3 million in seed funding. Fifty Years led the round and was joined by investors including Neo Kuma Ventures, Palo Santo, PsyMed Ventures, Lionheart Ventures, Christina Sass (co-founder of Andela), Edvard Engesæth (co-founder of Nurx), and Hans Gangeskar (co-founder of Nurx).
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- Brookfield is in talks to acquire AusNet Services, an Australian power transmission and distribution firm, for about A$9.6 billion ($7 billion). Singapore Power International and State Grid Corp. of China back the business.
- Thomas H. Lee Partners will acquire the semiconductor automation business of Brooks Automation, (Nasdaq: BRKS) for $3 billion in cash.
- Searchlight Capital Partners and British Columbia Investment Management agreed to invest in Adams Outdoor Advertising, the country’s fourth biggest billboard operator. The deal is valued at $1 billion, per Bloomberg.
- Advent International agreed to acquire Eureka Forbes, a Indian maker of water purifiers, from Shapoorji Pallonji Group in a deal that values the business at 44 billion rupees ($600 million).
- HighBar Partners acquired SilkRoad Technology, a Chicago-based talent retention platform. Financial terms weren't disclosed.
- Lynx Franchising, a portfolio company of MidOcean Partners, acquired Outdoor Living Brands, a Glen Allen, Va.-based franchisor of outdoor living stores. Financial terms weren't disclosed
- Novacap acquired a stake in Plusgrade, a Canadian provider of revenue and merchandising solutions to the travel industry. Financial terms weren't disclosed.
- Signpost, backed by HighBar Partners, acquired Securus Contact Systems, a Portland-based live chat and receptionist service. Financial terms weren't disclosed.
- ADQ acquired Acino, a Swiss pharmaceutical company, from Avista Capital Partners and Nordic Capital. Financial terms weren't disclosed.
- Aalberts N.V. acquired Premier Thermal Solutions, a Lansing, Mich.-based metal processing services, from Z Capital Partners. Financial terms weren't disclosed.
- BlackRock Long Term Private Capital acquired a majority interest in Summit Companies , a fire and life safety service and installation company, from CI Capital Partners. Financial terms weren't disclosed.
- Grifols proposed to takeover Biotest, a German pharmaceutical company, for €1.6 billion ($1.9 billion).
- Dometic agreed to acquire Igloo, a maker of coolers and drinkware, for $677 million.
- Locus Robotics, backed by investors including Scale Venture Partners, acquired Waypoint Robotics, a Merrimack, N.H.-based provider of industrial robots. Financial terms weren't disclosed.
- S4 Capital will acquire Zemoga, a technology services company. Financial terms weren't disclosed.
- Intermedia Cloud Communications, a Sunnyvale, Calif.-based communications and collaboration platform, filed for an initial public offering. The company posted $251.6 million in revenue in 2020 and reported a net loss of $21.7 million. Madison Dearborn Partners backs the firm.
- AvidXchange, a Charlotte, North Carolina-based accounts payable software company, filed for an initial public offering. The company posted $186 million in revenue in 2020 and reported a net loss of $101.2 million. Mastercard, Bain Capital Ventures, CDPQ, Temasek Holdings, and Capital Group mutual funds back the firm.
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- Enfusion, a Chicago-based investment management software company, filed for an initial public offering. The company reported revenue of $79.6 million in 2020 and net income of $4.1 million. Hillhouse Capital, FTV Capital, and ICONIQ Capital back the firm.
- Intuity Medical, a Fremont, Calif.-based diabetes digital health company, filed for an initial public offering. The company reported $34,000 in revenue in 2020 and a net loss and comprehensive loss of $32.6 million. Luther King Capital Management, KCK, Neuberger Berman, and Versant Ventures back the firm.
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- AEON Biopharma, a Newport Beach, Calif.-based clinical stage biopharmaceutical company, filed for an initial public offering. The company reported $2.5 million in revenue in 2020 and a net loss and comprehensive loss of $32.9 million. Medytox and Strathspey Crown back the firm.
- OVH Groupe, a French cloud storage company, plans to raise up to $469 million in an initial public offering in Paris, per Bloomberg.
- Fertiglobe, a fertilizer producer in the Middle East and North Africa, is planning to go public in Abu Dhabi as early as October, according to Bloomberg. An IPO could value the company at $7 billion. State-owned Abu Dhabi National Oil Company and fertilizer and chemical producer OCI NV own the firm.
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- Levine Leichtman Capital Partners, a Los Angeles-based private equity firm, closed LLCP Lower Middle Market Fund III with $1.4 billion.
- Illumina Ventures, a San Francisco-based healthcare-focused venture firm, closed its second fund with $325 million.
- Radical Ventures, a Canadian A.I.-focused venture fund, named Rob Toews as a partner. He was previously at Highland Ventures.
- Ara Partners, a private equity firm specializing in industrial decarbonization investments, named David Lynch as a principal. He was previously at Alinda Capital Partners.
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