Axios Pro Rata: Robinhood misses the mark — Roblox reschedules — Coinbase goes direct

Top of the Morning | Friday, January 29, 2021

Open in app View in browser   Presented By Cooley   Pro Rata By Dan Primack ·Jan 29, 2021 📺 We're back: "Axios on HBO" returns this Sunday, Jan. 31, at 6pm ET/PT on all HBO platforms! Here's the trailer.     Top of the Morning Illustration: Sarah Grillo/Axios   Robinhood spent yesterday taking from its credibility and giving to its critics, in one of the most inexplicable self-immolations Silicon Valley has ever seen. The latest: Robinhood is racing to raise $1 billion from existing investors, ahead of plans to reopen trading of GameStop and other '90s nostalgia stocks. What happened: Robinhood prevented its users from buying shares or call options on a bucket of highly volatile stocks that had been shorted by hedge funds and bid up by Reddit and TikTok traders. Several other trading platforms, including Charles Schwab and its TD Ameritrade subsidiary, also put some limits on such activity. Pundit reaction: 😡 Political reaction: 😡😡 Robinhood user reaction: 🤬🤬🤬 Why it happened: For most of the trading day, Robinhood said little of substance. This created a vacuum for conspiracy theorists, including some elected officials who didn't want to miss an opportunity to slam both Wall Street and Silicon Valley in the same breath. The most common claim was that Robinhood was helping out the big hedge funds, including Citadel, that pay it for order data. If true, however, it would mean that Robinhood (and Citadel) were willing to risk a massive loss of users, which would then decrease the inherent value of its order data. Robinhood has publicly denied that its decision was in any way related to conversations with market makers or other participants. After market close, Robinhood CEO Vlad Tenev said the decision was based on net capital and clearinghouse deposit obligations. That super boring explanation actually makes sense. For example, brokers like Robinhood (and Schwab) must send cash daily to the Depository Trust Co., and the amount changes based on anticipated trading volumes, etc. One source suggests Robinhood's DTC requirement had more than quadrupled from normal levels. But: Robinhood wouldn't confirm on the record that DTC requirements played a role. And Tenev said repeatedly last night that liquidity issues weren't a factor. So, to summarize: Robinhood didn't have enough money to cover regulatory requirements, except that it did. Oh, and then it raised $1 billion to reopen trades even though liquidity issues didn't prompt it to close trades. Yeah, my head hurts too. Robinhood not only has a big user trust problem, it also may have a political problem. And that translates into an IPO problem, as the company is said to be on the verge of filing confidential paperwork. Elected officials want to hold hearings on the entire GameStop matter, unable to resist the lure of verbally shaming Wall Street and Silicon Valley in the same breath. Much of the rhetoric, so far, is ideologically inconsistent — slamming hedge funds for "casino capitalism" while celebrating Reddit users who sat at the same tables (albeit with less money per player). The SEC this morning said it will "closely review" the situation. As for legislative or regulatory remedies, floated possibilities include the return of a transaction tax (which wouldn't have really matters), reinstating minimum spreads (which might matter a little) or limits on the ratio of shorts vs. outstanding shares (which would matter the most). The bottom line: If Robinhood woke up yesterday with short-term liquidity issues, it should have said so to users quickly, clearly and apologetically. Not doing so was a massive failure. And if it was anything else... well, then that would be even worse.     The BFD Source: Denis Kopotun via YouTube Roblox, a San Francisco-based gaming platform for kids and teens, has postponed its IPO due to regulatory concerns over how it recognizes revenue, according to Reuters. Why it's the BFD: Roblox is one of the most highly anticipated IPOs of 2021, having recently raised private funding at a $29.5 billion valuation, but this is its second setback in as many months. The initial delay was prompted by concerns that a first-day "pop" would disadvantage employee shareholders who intended to sell into the listing. This one relates to revenue generated by selling the platform's virtual currency, Robux, and means that Roblox will need to reconfigure its accounting methods. The bottom line: "Players use Robux in the game to buy a mix of durable goods which last for a period of time and consumable goods which are used immediately. Roblox had looked to treat all the revenue the same and amortize it over the duration of its paying user accounts, which is around two years. The SEC wants Roblox to be more specific and recognize revenue on consumable products as they are consumed, while the durable services will still be recognized over the life of the Roblox user." — Joshua Franklin, Reuters     Venture Capital Deals • Scalapay, an Italian "buy now pay later" startup, raised $48 million. Fasanara Capital led, and was joined by Baleen Capital and Ithaca Investments. http://axios.link/JdMk • Chefclub, a French mood media startup, raised $17 million. First Bridge Ventures led, and was joined by SEB Alliance, Korelya Capital and Algaé Ventures. http://axios.link/XToR 🚑 Concert Health, a San Diego-based, behavioral health access startup, raised $14 million in Series A equity and debt funding. Vertical Venture Partners led, and was joined by Town Hall Ventures and SVB. http://axios.link/q3TX • Raydiant, a San Francisco-based digital signage and experience platform, raised $13 million in Series A funding. 8VC led, and was joined by Atomic and Mark Wahlberg. www.raydiant.com • Appdetex, a Boise, Idaho-based brand protection platform, raised $12.2 million in Series C funding. Baird Capital led, and was joined by First Analysis, Origin Ventures and EPIC Ventures. www.appdetex.com • SamCart, an Austin, Texas-based e-commerce platform for DTC brands, raised $10 million in Series A funding. TTV Capital led, and was joined by Fin VC and the George Kaiser Foundation. www.samcart.com • Verusen, an Atlanta-based connected supply chain startup, raised $8 million in Series A funding. Forte Ventures and Flyover Capital co-led, and were joined by Glasswing Ventures, Zetta Venture Partners, Kubera VC and Engage. http://axios.link/bbQ9 • CybSafe, a British "behavioral" cybersecurity platform, raised $7.9 million in Series A funding. IQ Capital led, and was joined by Hanover Digital Investments and B8 Ventures. http://axios.link/9Nhc • Zadar Labs, a San Jose, Calif.-based developer of imaging radars for autonomous systems, raised $5.6 million in seed funding led by Zoox founder Tim Kentley Klay. Others backers include HYPR, Leslie Ventures, Plug and Play Ventures and Mentors Fund. http://axios.link/RAiF • Gowalla, the resurrected Foursquare rival that's now a social AR app, raised $4 million in seed funding co-led by GV and Spark Capital. http://axios.link/tBUs • GoodTrust, a Palo Alto-based digital legacy management platform for families, raised $2.3 million in seed funding from Bling Capital, Synetro Ventures and Azure Capital Partners. http://axios.link/lKw3 • Whyline, a New York-based provider of virtual queuing and appointment software, raised $1.25 million led by e.Republic Ventures. www.whyline.com     A message from Cooley Cooley's 2020 tech M&A year in review     2020 represented a fundamental shift in how tech companies do business: from a COVID-driven reliance on software and virtual connectivity, to the rise of SPACs, increasing attention on ESG matters and the specter of activism in 2021. Visit Cooley's M&A blog for key insights for the year to come.     Private Equity Deals 🚑 Health Enterprise Partners invested in Aware Recovery Care, a Wallingford, Conn.-based in-home addiction treatment company. www.awarerecoverycare.com • L Catterton acquired a control stake in JOTT, a French casual outerwear brand. http://axios.link/Qw7t • Luminate Capital Partners sold AMTdirect, a Cornelius, S.C.-based provider of lease accounting, administration and facilities management software, to MRI Software, a Solon, Ohio-based portfolio company of GI Partners, TA Associates and Harvest Partners. www.mrisoftware.com 🍺 Platinum Equity has approached Marston's (LSE: MAR) about a takeover, with the news pushing the British pub operator's market cap north of £560 million. http://axios.link/bHt9 • TPG agreed to buy a majority stake in Certify, a Portland, Maine-based provider of privileged access management solutions, from Thoma Bravo. http://axios.link/B0Ho     Public Offerings • Coinbase, the San Francisco-based cryptocurrency trading platform, said it will go public via a direct listing rather than through a traditional IPO. http://axios.link/Nkoi • Dr. Martens, a British bootmaker owned by Permira, raised nearly £1.3 billion at a £3.7 billion market cap in its London IPO, and then saw shares rise. http://axios.link/LM8r • Monde Nissin, a Philippine food maker whose brands include Lucky Me instant noodles, is prepping a Manilla IPO that could raise up to $1 billion, per Bloomberg. http://axios.link/ID2o 🍺 Thai Beverage is prepping an IPO for its brewery unit, which could fetch a $10 billion valuation, per Bloomberg. http://axios.link/XD4B     SPAC Stuff Source: GIPHY • Nerdy, the parent company of St. Louis-based online learning platform Varsity Tutors, confirmed that it will acquired by TPG Pace Tech Opportunities (NYSE: PACE). at a valuation of $1.7 billion. http://axios.link/xMPa • WeWork, the SoftBank-backed co-working space giant, is in talks to go public via a reverse merger with a SPAC affiliated with Bow Capital Management, per the WSJ. http://axios.link/y7Yr • BlueRiver Acquisition, TMT and entertainment-focused SPAC, raised $250 million in its IPO. http://axios.link/yY7Q • Brookline Capital Acquisition, a life sciences-focused SPAC formed by Brookline Capital Markets, raised $50 million in its IPO. http://axios.link/CpSu • CF Acquisition V, a SPAC formed by Cantor Fitzgerald, raised $250 million in its IPO. http://axios.link/d3OB • Clarim Acquisition, an e-commerce focused SPAC led by James McCann (founder of 1-800-Flowers.com), raised $250 million in its IPO. http://axios.link/jXhT • Pathfinder Acquisition, a tech SPAC formed by HGGC and Industry Ventures, filed for a $275 million IPO. http://axios.link/0MdW • Z-Work Acquisition, a work tech-focused SPAC, raised $200 million in its IPO. http://axios.link/zKFh     Liquidity Events • The London Stock Exchange (LSE: LSE) completed its $27 billion purchase of financial data provider Refinitiv from The Blackstone Group and Thomson Reuters. http://axios.link/aDRb • Workday (Nasdaq: WDAY) agreed to buy Denmark-based employee feedback platform Peakon for $700 million in cash. Peakon had raised $68 million from Balderton Capital, Heartcore Capital, Idinvest Partners, ETQ Ventures and Atomico. http://axios.link/O1b4     More M&A • Alstom (Paris: ALO) completed its €5.5 billion purchase of Bombardier's (TSX: BBD) rail business. http://axios.link/El17 • Bertelsmann is seeking a buyer for French broadcast group M6, and has reached out to potential bidders Altice Europe and Vivendi, per Reuters. http://axios.link/DWF1 🚑 Sharecare, an Atlanta-based health and wellness engagement platform, agreed to buy Doc.ai, a Palo Alto-based health care digital transformation startup backed by firms like Anthem. Sharecare is in talks to be acquired by a SPAC, and has raised nearly $400 million in private funding. http://axios.link/3Xo7 • Xerox (NYSE: XRX) acquired CareAR, an Austin, Texas-based based AR support platform for field workers and customers. www.carear.com     Fundraising • KKR is targeting $15 billion for its latest flagship North American buyout fund, per Reuters. http://axios.link/xcSo     It's Personnel • BlackRock named Joud Abdel Majeid as deputy CFO. He previously was Larry Fink's chief of staff, a position now to be filled by Sarah Schaffer. www.blackrock.com • Bill Duplisea joined Solamere Capital as heads of business development. He previously was with GLG and BlackRock. www.solamerecapital.com • Lightyear Capital promoted Jay Comerford and Max Rakhlin to managing directors and members of the firm's investment committee. www.lycap.com 🚑 Tim Patterson is leaving OMERS Private Equity, where he led health care investing, per PE Hub. http://axios.link/QtVR • Rodney Reid joined Moelis & Co. as global head of private funds advisory. He previously was with Evercore. www.moelis.com     Final Numbers Data: Bloomberg; Chart: Sara Wise and Andrew Witherspoon/Axios. Note: Stocks limited to companies with a market capitalization of more than $150 million.     A message from Cooley Cooley's 2020 life sciences M&A year in review     In 2020, the life sciences industry responded to the COVID-19 pandemic with unprecedented collaboration and an M&A strategy focused on core assets. Cooley's Life Sciences M&A in Review breaks down the most notable shifts in the market, and what we might expect in 2021.   ✅ Thanks for reading Axios Pro Rata! Please ask your friends, colleagues and to sign up.   Axios thanks our partners for supporting our newsletters. Sponsorship has no influence on editorial content. Axios, 3100 Clarendon B‌lvd, Suite 1300, Arlington VA 22201   You received this email because you signed up for newsletters from Axios. Change your preferences or unsubscribe here.   Was this email forwarded to you? Sign up now to get Axios in your inbox.   Follow Axios on social media: