Unicorn Watch: The Self-Dealing Edition

Morning Markets: This post is late today as I had to attend a meeting, which I survived. So let’s talk about unicorns.

The unicorn IPO market is jammed while the federal government tries to unstick its gears, but that isn’t stopping the cohort from doing all sorts of fascinating things. I want to take a moment to collate the latest from the group of private tech companies worth over $1 billion, as it’s a varied list and hard to keep track of in pieces.

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So here’s the latest, greatest, and silliest from our horned friends over the past few days.

More Scooter Dollars

Big Scooter is about to get even larger with both Lime and Bird, the key players in the American market, raising new funds.

Bird’s round, per Axios’s Kia Kokalitcheva, may get $300 million onto its balance sheet (prior raise total: $415 million), but at terms that aren’t super exciting. The same Axios piece notes that the firm will raise the new capital at “its existing $2 billion pre-money valuation,” likely implying a greater-than-desired amount of dilution.

Lime, Bird’s arch-rival aside from the twin evils of capex and opex, is raising $400 million at a $2 billion valuation, according to Recode (prior raise total: $445 million). That sure sounds familiar! For Lime, however, the valuation is a doubling of its dated $1 billion price tag that it secured during its last funding round.

Regardless, we’re talking about $700 million more being invested into two companies that rent scooters to people around the world for a few nickels. As we noted just the other day, so much for a slowdown.

Katerra Raises (Again) From SoftBank (Again)

Sticking close to companies that taking another infusion from the gravy boat: Katerra is raising more money.

Katerra, a construction company that supplies pre-fab building elements for new projects, is raising $700 million from SoftBank, according to The Information. Katerra raised $865 million from SoftBank about a year ago. Raising another round from the same capital bucket so quickly is notable.

The Vision Fund will eventually run out of money. What will happen to all the companies that it helped build into capital-acquisition machines when it does? What does Katerra look like without access to regular nine-figure checks? Or WeWork?

Is Bad Corporate Governance Spelled “W-E-W-O-R-K”?

It turns out that WeWork’s CEO Adam Neuman is leasing buildings to the company now called We. Does that mean that Adam is using money that he raises from external parties to spend through the company he has controlling interest over to pay himself?

Sounds like a conflict of interest! The Wall Street Journal story on the matter notes that “at least one instance before he secured full control over the company, Mr. Neumann wasn’t able to complete a similar deal.” But now that he does, he can!

I cannot imagine working for someone who so flagrantly put their own interests ahead of the needs of the company they run, and, ostensibly, care about. The whole setup feels both yucky and greedy. I suppose if Adam is cutting We a deal, erasing any personal profit in the matter to save We money on rent, that would be cool. But who wants to bet that that isn’t the case?

We is, therefore, enriching its CEO because no one can say no. As the Journal reports, Adam “has more than 65% of the overall share vote.” That’s bad news! But it’s not uniquely bad news. It’s been a bad innings for founder-controlled companies recently. Snap, which is run by a famously reclusive dude who appreciates Nandos and private jets, has control tied up in its founders. And it’s burning through capital and market cap and executives faster than you can laugh.

And Facebook has related problems. One person controls that company, which hasn’t gone well lately. What can be done about it? Nothing! It’s all up to Zuck, whose personal currency has gone from December 2017 bitcoin to January 2018 bitcoin to 2001 Beenz.

Airbnb Posts More Kinda-Profit

Let’s end on something positive. Airbnb, one of the most famous unicorns in existence, remains nearly profitable. Here’s Reuters with the quote:

Without revealing other numbers such as revenue and profit, the company said it was profitable before accounting for interest, taxes, depreciation and amortization (EBITDA).

As far as unicorns go, being EBITDA positive is a good result. Most aren’t close. And some unicorns are super unprofitable even using adjusted metrics. EBITDA doesn’t count all costs, of course, but the metric and the result let us know that on a cash basis Airbnb is probably in pretty good shape.

How far from GAAP break-even it will be, inclusive of things like share-based compensation, isn’t clear. But that it is close to real profit is a good place for a company at Airbnb’s growth point, I’d wager.

All that and Slack decided to give Google Photo’s logo a spin. Literally.

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