A Bay Street sign is seen in Toronto in this file photo.© Mark Blinch / Reuters
Securities regulators in Ontario, Quebec, New Brunswick, Manitoba and Alberta have released a set of guidelines to make fairness opinions commissioned by boards more transparent for investors in deals that involve conflicts of interest. Story (subscribers)
Mundo Inc., which lists Amaya Inc. founder David Baazov among its investors, has yanked its initial public offering, citing "market conditions." Story (subscribers)
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Apollo Global Management LLC amassed $24.6-billion for the largest fund ever raised by a leveraged-buyout firm, crowning a string of record-setting war chests as investors hunt for better returns. Story
Deutsche Bank forecast lower full-year revenues and only a modest improvement in earnings on Thursday, after second-quarter sales were hit by a drop in capital markets trading. Story
The publisher of marijuana enthusiast magazine, "High Times," plans to take the company public, High Times Holding Corp announced Thursday, as an increasing number of U.S. states legalize the drug. Story
DEALS
Mitel Networks Corp. has struck what could be its biggest deal in more than two years as it recovers from a failed move into the wireless business. Story
Canadian forestry company West Fraser Timber Co. says it has agreed to buy a U.S. lumber business for about $430-million (U.S.). Story
German sportswear group Adidas has agreed to sell its CCM ice hockey brand to private equity firm Birch Hill Equity Partners for $110-million, it said on Thursday, as it focuses more strongly on its core Adidas and Reebok brands. Story
OSRAM Licht AG has acquired a strategic 25 per cent stake in LeddarTech Inc. LeddarTech has previously raised $9.5-million from BDC Venture Capital, GO Capital LP, iSource, Accès Capital, Desjardins-Innovatech s.e.c. Private Capital Journal
Slack Technologies Inc. is raising about $250 (U.S.) million in a funding round co-led by SoftBank Group Corp., according to people familiar with the matter, as the Japanese investment firm helps drive a new venture capital boom. Bloomberg
WHAT WE'RE READING
Canada's stock market has been ablaze with reefer madness, but the country's largest exchange is grappling with how to deal with pot companies that have investments in the U.S., where marijuana is still banned by federal law. There could be more certainty soon, according to Vic Neufeld, the chief executive officer of licensed producer Aphria Inc. Bloomberg
Element AI made a massive splash last month when the company announced it had raised $102-million (U.S.) in a series A funding round – one of the largest of any AI company to date. Since then, the company's phone has been ringing off the hook, proverbially speaking. "The Prime Minister of Canada called me personally to thank me for being an inspiration to other Canadians and making a difference." Venturebeat
In the first half of 2017, nearly 9,000 M&A transactions in North America and Europe closed for an aggregate of $911-billion (U.S.), putting this year on pace to see 20 per cent declines for both value and volume. Pitchbook
FROM THE ANALYSTS
Scotia Capital analyst Paul Steep hasn't started to include Open Text Corp.'s offer to buy Guidance Software Inc. into his financial models yet. Waterloo, Ont.-based Open Text said earlier this week that it would pay $7.10 (U.S.) per share for Guidance.
"We are taking a more cautious approach regarding the firm's acquisition of Guidance and have elected not to include the acquisition in our financial model as is our usual practice based on: (1) Open Text's offer representing only a modest premium of about 3 per cent to the unaffected share price of $6.90/share prior to the announcement (30-day average of about $6.80/sh); and (2) founder and former Chairman Shawn McCreight representing a potential blocking position, holding about 24 per cent of outstanding shares (other large holders include PRIMECAP at about 14 per cent and RGM Capital at about 10 per cent)."
FROM THE ACADEMICS
If you or your fund own part of a unicorn, a startup valued at north of $1-billion (U.S.), you may want to take a second look at how it's valued.
Gornall of the University of British Columbia (UBC), Sauder School of Business and Ilya A. Strebulaev of Stanford University, Graduate School of Business; National Bureau of Economic Research, have written a paper titled "Squaring Venture Capital Valuations with Reality."
Upon their analysis, they say that half of the unicorns they looked at lost their unicorn status.
Here is the abstract:
"We develop a financial model to estimate the fair value of venture capital-backed companies and of each type of security these companies issue. Our model uses the most recent financing round price and the terms of that financing to infer the value of each of their shares. Using data from legal filings, we show that the average highly-valued venture capital-backed company reports a valuation 49 per cent above its fair value, with common shares overvalued by 59 per cent. In our sample of unicorns – companies with reported valuation above $1-billion – almost one half (53 out of 116) lose their unicorn status when their valuation is recalculated and 11 companies are overvalued by more than 100 per cent. Overvaluation arises because the reported valuations assume all of a company's shares have the same price as the most recently issued shares. In practice, these most recently issued shares almost always have better cash flow rights than the previously issued shares, so equating their prices significantly inflates valuations. Specifically, we find 53 per cent of unicorns have given their most recent investors either a return guarantees in IPO (14 per cent), the ability to block IPOs that do not return most of their investment (20 per cent), seniority over all other investors (31 per cent), or other important terms."
You can find the full report here.