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Silicon Valley: heavy chance of IPOs

It’s a moment many in Silicon Valley have been anticipating for years: Airbnb’s listing date, and the end of the short-term rental group’s more than decade-long run as a private company.

But first, we need to talk about what’s been going on with DoorDash, the US meal delivery platform backed by SoftBank.

With shares closing at $189.51 on Wednesday — 86 per cent above the price of their initial public offering — it’s a sign of the feverish appetite among public investors for fast-growing, technology-driven companies and, of course, a hungry population in lockdown.

The San Francisco-based company had previously sold shares to investors at $102 apiece on Tuesday evening, above its target price range, raising almost $3.4bn in proceeds. 

The question remains as to whether DoorDash and its fellow tech debutantes will eventually fall to Earth. As the FT’s Lex column writes about DoorDash’s soaring valuation: “It is the latest indicator that markets have utterly cleaved from fundamentals.”

Now back to Airbnb. Its stock market debut, which also priced above expectations, is significant for several reasons. 

For one, public investors will get their first crack at investing in a talisman of the so-called sharing economy, whose marketplace has changed the nature of vacation rentals. (Even though big mutual funds including Fidelity and T Rowe have been invested for years.)

Airbnb chief executive Brian Chesky © FT Montage

The listing will also bring in $3.4bn in proceeds for Airbnb and give it access to the public capital markets. (That said, the rental group had no problems raising debt and equity as a private company.) Employees sitting on valuable stock options will now be able to turn those into real dollars.

Perhaps most significant of all, Airbnb’s venture capital and private equity backers will move closer to offloading their lucrative investments in the company.

As Silicon Valley start-ups such as Affirm, Roblox and Wish also prepare for IPOs, plenty of VC firms will soon be getting their day in the sun after waiting years as their invested companies delayed going public.

Among some of the biggest winners of Airbnb’s listing are:

  • Sequoia Capital, with a stake worth about $5.6bn at the IPO price;

  • Founders Fund, with a stake worth about $1.8bn;

  • Yuri Milner’s DST Global, with a stake worth about $960m;

  • Silver Lake and Sixth Street, which held a combined stake worth about $610m from warrants they received at a discounted valuation as part of a rescue package in April.

For further reading, don’t miss the big read by DD’s Miles Kruppa and the FT’s Dave Lee on Airbnb’s pandemic plight and journey to the public market.

Trouble at 666 Fifth Avenue

Say what you like about Jared Kushner, but the senior White House adviser and son-in-law of US president Donald Trump has notched up a princely résumé in his less than four decades.

On the eve of the financial crisis, when he was just 26, Kushner helped his family sign a $1.8bn deal for 666 Fifth Avenue — then the most expensive New York office purchase in history.

And since Trump took office in 2017, Kushner has assumed a far-reaching role in crafting US foreign policy, meeting Middle Eastern leaders outside traditional diplomatic channels and venturing potential solutions — albeit highly contentious ones — to some of the most enduring geopolitical quandaries on the planet.

Jared Kushner and Steve Roth, the billionaire who co-owned 666 Fifth Avenue, which was leased for 100 years by Brookfield Asset Management © Andrew Harnik/AP

On Wednesday DD’s Mark Vandevelde revealed that Democrats in the US Congress have launched an investigation into whether Kushner’s roles as real estate tycoon and foreign policy maven may have improperly collided.

Lawmakers from the Senate finance and House of Representatives foreign affairs committees on Wednesday sent a wide-ranging document request to Brookfield Asset Management, which counts the Qatar Investment Authority among its major financial backers and paid more than $1bn for a long-term lease on 666 Fifth Avenue in 2018.

The deal followed frenetic efforts by the Kushner family to raise enough money to meet a $1.2bn mortgage payment on the tower. It coincided with a series of sharp turns in US foreign policy towards Qatar, a traditional US ally that was under blockade by neighbours including Saudi Arabia.

Bruce Flatt, chief executive of Brookfield Asset Management © Bloomberg

Senator Ron Wyden and Representative Joaquin Castro cited an FT investigation published in February, which pointed to extensive financial ties between a Qatari sovereign wealth fund and the Brookfield vehicle that helped the Kushners at Fifth Avenue. (Brookfield has said that Doha neither knew about the deal nor influenced it.)

And in a separate demand for documents directed to the White House, the lawmakers wrote: “The stunning reversal in US policy towards Qatar raises serious questions about what role Jared Kushner — and the financial interests of his family — may have played in influencing US foreign policy regarding the blockade.”

LSEG/Refinitiv: London’s big payday

One of London’s biggest transactions in recent years is coming to a close soon, after more than 16 months of grinding. 

We are of course talking about the London Stock Exchange Group’s planned $27bn takeover of the data provider Refinitiv

A pesky EU antitrust process is expected to be completed next month and that means a big payday is on the way for those working on the deal.

Just how much will be shelled out to advisers and financiers was laid out in a short paragraph on page 308 of a mammoth 332-page prospectus. 

The total figure, £835m (or $1.1bn), ranks among the largest DD has ever seen in the London market. However, it does not surpass the gobsmacking $2bn in fees and taxes linked to Anheuser-Busch InBev’s $120bn takeover of the brewer SABMiller in 2016.

The fees for the deal are split into two categories with £358m going to services including financial advisory, legal work and accounting and £477m going to financing costs related to the deal, which will see the issuance of new shares and debt to pay Refinitiv’s owners.

That means a series of banks including Goldman Sachs, Morgan Stanley and Barclays as well as the boutique advisory firms including Robey Warshaw, Evercore and Canson Capital Partners are set to cash in. 

If the deal closes, it’ll also be a good day to be Stephen Schwarzman and Blackstone. The US private equity group bought a majority stake in Refinitiv for $17bn from Canada’s Thomson Reuters in early 2018. The group will hold a 37 per cent stake in the enlarged company once the deal is complete, leading the consortium of private equity firms selling the data giant to the LSE. 

Two Blackstone representatives, Martin Brand and Douglas Steenland, will join the LSE board as part of the deal. Brand is largely credited with the idea of carving Refinitiv out of Thomson Reuters. He also seems to be enjoying his success, with The Real Deal reporting in July that he purchased a $10m home on Palm Beach’s Everglades Island through a company tied to his name. 

The financial data sector is set to play host to more bumper paydays in the future, as S&P Global’s capture of IHS Markit for $44bn and Intercontinental Exchange’s $11bn purchase of the mortgage software provider Ellie Mae kick into gear.

Job moves

  • Starbucks has named its vice-chair Mellody Hobson as its next chairman. She will succeed Myron Ullman III when he retires in March. Hobson is the co-CEO at Ariel Investments and is also on the board of JPMorgan Chase

  • Separately, Ariel has hired Arielle Patrick as its new chief communications officer. Patrick, who will be also sitting on the operating committee of the asset manager, joins from the public relations firm Edelman. 

  • Sullivan & Cromwell is appointing Jamie McDonald as a partner in New York. He was previously director of enforcement at the Commodity Futures Trading Commission.

  • White & Case has recruited two new partners from Ropes & Gray to join its US global financial restructuring and insolvency practice: Keith Wofford in New York and Stephen Moeller-Sally in Boston. The firm also added Marc Petitier as a partner in its global M&A practice in Paris. He joins from Linklaters.

  • UK insurer Aviva has appointed Pippa Lambert as an independent non-executive director to its board. She was previously global head of human resources at Deutsche Bank.

  • Baird has hired Derrick Li as a managing director on its global healthcare investment banking team. He joins the New York office after serving as head of strategy and investor relations for Cellular Biomedicine Group.

Smart reads 

Shelling out Royal Dutch Shell may be based in the Netherlands, but the real money is made on the sunny isles of Bermuda and the Bahamas, where the oil company saves hundreds of millions of dollars in taxes. (Reuters)

Highly caffeinated Starbucks’ brews are strong enough to outlast the global pandemic, its chief Kevin Johnson told the FT in an interview. His bullish stance on commuters’ return to the chain’s outposts for lockdown lattes starkly contrasts the grim outlooks for smaller rivals. (FT)

Monopoly man Unperturbed by intensifying political scrutiny and an onslaught of antitrust cases, Facebook founder Mark Zuckerberg is on a dealmaking spree to harness the entire ecommerce ecosystem, and finally turn a profit at WhatsApp in the process. (Bloomberg)

Smart listens

Countdown to Brexit As Britain prepares to unwind from the EU come January 1, the City of London braces for an uncertain fate. Philip Stafford, editor of FT Trading Room, and Stephen Morris, the FT’s banking editor, mull the potential consequences for London’s position as a global financial powerhouse on our Behind the Money podcast. (FT.com, Apple Podcasts, Spotify)

(Go deeper with this big read on the subject, the first in a series by the City editor of the FT, Jonathan Ford.)

News round-up

DE Shaw calls on ExxonMobil to cut costs or risk dividend (FT)

Bidders line up for AT&T’s troubled DirecTV business (FT) 

Platinum Equity nears $7bn deal for HNA’s Ingram Micro (BBG) 

Deutsche Bank ‘switching from defence to offence’, chief tells investors (FT)

UBS backs chief as court triggers probe into his role in ING money-laundering scandal (FT)

GardaWorld considers re-entering battle for G4S (FT) 

Billionaire shocked by Son’s quick $50m trading loss (BBG)

TSE change opens window for Bain to revive Kioxia IPO (FT)

Xavier Niel’s organic food Spac rallies in Paris debut (FT)

UK sets sights on tax raid on Uber, Airbnb and TaskRabbit (FT)

Due Diligence is written by Arash Massoudi, Kaye Wiggins and Robert Smith in London, Javier Espinoza in Brussels, James Fontanella-Khan, Ortenca Aliaj, Sujeet Indap, Eric Platt, Mark Vandevelde and Francesca Friday in New York and Miles Kruppa in San Francisco. Please send feedback to due.diligence@ft.com

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