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WeWork Tries to Address Investor Concerns With Big Governance Changes: Term Sheet

The company plans to curb the voting power of Adam Neumann in order to get its upcoming IPO back on track.
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Let’s talk initial public offerings.

WEWORK’S AMENDMENTS: WeWork is reportedly planning “sweeping” governance changes that would assuage investor concerns as it pushes ahead with its listing on Nasdaq.

One, it plans to curb the voting power of co-founder Adam Neumann in order to get its upcoming IPO back on track. The company will change its high-vote stock from 20 votes to 10 votes a share to cut back on Neumann’s control of WeWork. [Lucinda and I did a super-voting share explainer once. Watch it here.] WeWork’s original IPO plan included three classes of common stock, with holders of Class A shares getting one vote per share, while Class B and Class C owners got 20 votes for each. This arrangement would have given Neumann the majority of the voting power.

Secondly, no member of Neumann’s family will sit on the board. Rebekah Neumann, his wife, is listed as a founder, chief brand and impact officer of WeWork and founder and CEO of WeGrow, a corporate project to build and run private elementary schools. The company has now eliminated a provision in which she would play a key role in choosing Neumann’s successor if he dies or is permanently disabled in the next 10 years.

Finally, the company also said that Neumann, who previously said he wouldn’t sell shares for a year after the IPO, would sell no more than 10% of his shareholdings in the second and third years after the offering. He will also pay back any profits he makes from his real-estate transactions with the company.

Despite questions and concerns from investors, Neumann has reportedly said privately he is committed to moving forward with the IPO, according to the WSJ.

CLOUDFLARE HITS THE PUBLIC MARKETS: Cloudflare priced its shares at $15 apiece Thursday, raising $525 million in the process. The IPO gives the security provider an initial market cap of around $4.4 billion.

CloudFlare has raised more than $332 million in total venture capital funding since its inception. Its largest outside backers include Fidelity, Venrock, NEA, and Pelion Ventures. The company was last valued at $3.2 billion in the private markets.

Last month, CloudFlare received negative publicity in connection with the use of its services by 8chan, a forum website that served as inspiration for the recent attacks in El Paso, Texas and Christchurch, New Zealand. Even though CloudFlare severed its ties, it went on to list it as a risk factor in its prospectus.

The company will begin trading its shares on the New York Stock Exchange under the “NET” stock ticker this morning.

SMILEDIRECTCLUB IPO ISN’T ALL SMILES: SmileDirectClub shares slid 28% in their market debut yesterday, the worst market debut for a unicorn start-up this year. The company’s shares closed at $16.67 after opening at $20.55. SmileDirectClub ranks as the fifth worst debut of the 109 companies to go public this year. The company priced its initial public offering at $23 per share on Wednesday, above the expected range of $19 to $22. It sold 58.5 million shares, raising $1.3 billion and valuing the online dentistry company at $8.9 billion. Thursday’s move values the company at roughly $6.4 billion. Read more.

AN IPO POP: The other unicorn company to make its public market debut yesterday was biotech company 10x Genomics. Shares surged as much as 49%. The stock opened trading at $54 and rose as high as $58 per share midday before closing at $53. The company priced its 9 million shares Wednesday night at $39 per share, above the expected range of $31 and $35. The stock is among the top 25 IPO debut performances year to date. Read more.

VENTURE DEALS

Shape Security, a Mountain View, Calif.-based platform for bot and online fraud mitigation, raised $51 million in funding at a pre-money valuation of $1 billion. C5 Capital led the round, and was joined by investors including included Kleiner Perkins, HPE Growth, Norwest Ventures Partners, Focus Ventures, JetBlue Technology Ventures, Top Tier Capital Partners, and EPIC Ventures.

Dapper Labs, the Canada-based blockchain games company behind CryptoKitties, raised $11 million in funding. Investors include Andreessen Horowitz, Accomplice, AppWorks, Autonomous Partners, Fenbushi Digital, Warner Music Group, Union Square Ventures, Venrock, Digital Currency Group, Animoca Brands, SV Angel, Version One, and CoinFund.

Rafay Systems, a Sunnyvale, Calif.-based platform which allows companies to deploy performance and geography sensitive workloads, raised $8 million in Series A funding. Ridge Ventures led the round, and was joined by investors including NTT DOCOMO Ventures, Costanoa Ventures and Moment Ventures.

junzi kitchen, a New York-based operator of restaurants serving fast-casual Chinese cuisine, raised $5 million in pre-Series A funding. LDR Ventures led the round, and was joined by investors including DOM Capital, Uniwill Ventures,Pocket Sun, Chip Wade, and Gregory Ho.

Truman’s, a Louisville, Ky.-based direct-to-consumer cleaning products company, raised $5 million in seed funding. Henkel led the round.

Patch Homes, a San Francisco-based provider of a home equity sharing product, raised $5 million in Series A funding. Union Square Ventures led the round, and was joined by investors including Tribe Capital, Techstars Ventures, Breega Capital and Greg Schroy.

Forager, a Chicago-based startup focused on cross-border logistics, raised $3.25 million in seed funding. Chicago Ventures led the round.

Argyle, a New York-based company that provides infrastructure for consumers to connect their workforce platforms to businesses, raised $2.6 million in seed funding. Investors include Checkr and Bain Capital Ventures.

Prevu, a New York-based digital home buying platform, raised $2 million in seed funding. Corigin Ventures led the round, and was joined by investors including Kairos and AVG Basecamp Fund.

HEALTH & LIFE SCIENCES DEALS

InDevR Inc, a Boulder, Colo.-based biotechnology company, raised $7 million in Series A funding, from Adjuvant Capital.

PRIVATE EQUITY DEALS

Opus Agency, a portfolio company of Growth Catalyst Partners, acquired Number 20, a London-based event and travel management agency. No financial terms were disclosed.

IPOs

Anheuser-Busch InBev, the beer giant, is considering a Hong Kong IPO with a slimmed down version of its business, the Wall Street Journal reports citing sources. The deal could raise $5 billion. Read more.

TeamViewer, a German software company, is set to raise up to 2.31 billion euros ($2.5 billion) in Frankfurt, putting it on track for a 5.5 billion euro ($6.1 billion) valuation. Read more.

ESR Cayman Ltd, a logistics real estate developer, is preparing to relaunch its Hong Kong IPO of up to $1.24 billion. Warburg Pincus backs the firm. Read more.

AllHome Corp, a Filipino home furnishing chain, launched an IPO of up to 18.1 billion pesos ($348 million) on Friday. Read more.

SpringWorks Therapeutics, a Stamford, Conn.-based biotech for rare cancers, now plans to raise $153 million in an upsized IPO of 9 million shares priced between $16 to $18. The firm has yet to post a revenue and posted a loss of $17.8 million in 2018. Pfizer, Bain, OrbiMed, and Perceptive Life Sciences back the firm. It plans to list on the Nasdaq as “SWTX.” Read more.

Satsuma Pharmaceuticals, a South San Francisco-based clinical-stage biotech for migraines, raised $83 million (30% insider bought) in an upsized IPO of 5.5 million shares priced at a midpoint of $15 apiece. The firm has yet to post a revenue and posted a loss of $7.3 million in 2018. RA Capital, TPG Biotechnology Partners, and Shin Nippon Biomedical Laboratories back the firm. It plans to list on the Nasdaq as “STSA.” Read more.

Alerus Financial, a Grand Forks, N.D.-based financial services firm, raised $60 million in a downsized IPO of 2.9 million shares priced below range at $21 apicece. The firm posted net interest income of $75.2 million, noninterest income of $102.7 million, and net income of $25.9 million in 2018. It plans to list on the Nasdaq as “ALRS.” Read more.

Neptune Energy, the oil and gas firm, is planning an IPO for April 2020, Reuters reports. Carlyle Group and CVC Capital back the firm. Read more.

EXITS

Stellex Capital Management agreed to sell Morbark, a Winn, Mich.-based manufacturer of high-performance equipment and aftermarket parts for forestry, tree maintenance, biomass, land management and recycling markets, to Alamo Group Inc. (NYSE:ALG) for $352 million.

PEOPLE

Dan Glickman joined Harvest Partners as a partner.

Mainsail Partners hired Katherine Claire “KC” Kanoff and Jason Thorn as vice presidents, and Parker Draughon, Max Thompson and Cally Tullo as associates.

Accel named Amy Saper as a principal.

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