Term Sheet — Friday, August 3

WALL STREET + CRYPTO

Good morning, Term Sheet readers.

Major news out this morning that’s bound to cause ripples in the world of cryptocurrency.

One of the most powerful players on Wall Street, along with some of America’s leading companies, is launching a startup that could lead to Bitcoin breaking through as a mainstream currency.

This morning, the Intercontinental Exchange, which owns the New York Stock Exchange and other global marketplaces, announced that it is forming a new company called Bakkt. The new venture will offer a federally regulated market for Bitcoin. Through this new entity, ICE aims to transform Bitcoin into a trusted global currency with broad usage.

ICE is partnering with Microsoft, Boston Consulting Group, and Starbucks. ICE did not immediately disclose the total investment of the investment partners, a group which also includes Fortress Investment Group, Eagle Seven, and Susquehanna Investment Group.

In an exclusive interview with Coins2Day, Kelly Loeffler, ICE’s head of digital assets, who will serve as CEO of Bakkt, said ICE and its partners have been “building the factory” that will power Bakkt in secrecy for the past 14 months.

For one, Bakkt hopes to make it easier for millennials to own Bitcoin in their 401(k)s. That would tap Bitcoin’s popularity as an alternative to stocks and bonds to generate giant trading volumes. And that flood of institutional buying and selling would take the terror out of Bitcoin by smoothing its wild price swings.

Another one of Bakkt’s ambitious goals? Use Bitcoin to streamline and disrupt the world of retail payments by moving consumers from swiping credit cards to scanning their Bitcoin apps. (Looking at you, Starbucks.)

Coins2Day’s Shawn Tully reports:

“Retail payments is an industry that appears ripe for Sprecher-style disruption. Today, Americans charge $7 trillion in goods and services every year—around 60% of GDP—on credit and debit cards, and through digital portals such as PayPal. The stores and restaurants that accept those cards typically pay 2% to 3% to around six intermediaries, including “merchant acquirers” who sign up the merchants, credit card giants such as Visa and MasterCard, and the banks that issue the cards.

It’s hard to overstate how drastically a shift to Bitcoin could crunch those lofty fees. Consumers could pay for groceries or detergent directly from the Bitcoin wallets on their iPhones or PCs, right from a scanner at Walmart or Starbucks, with no banks taking fees in the middle. If Bitcoin became the chief currency for retail, it’s likely that credit cards would disappear.”

Read the full feature here.

THE BIKE CULT: Peloton, which sells an Internet-connected fitness bicycle, just raised a massive new round of funding. It announced a $500 million Series F round, which values the company at $4 billion. TCV led the round, and was joined by investors including Tiger Global, True Ventures, Wellington Management, Fidelity, NBCUniversal, and Kleiner Perkins.

Peloton will use the fresh infusion of capital to expand to the U.K. And Canada this fall, open at least 20 new retail showrooms, and launch its second product, the Peloton Tread. It’s expected that Peloton will pursue an IPO in 2019.

Peloton used to be heavily criticized for its expensive stationary bikes ($1,995 a pop), but the home fitness startup has quietly built an elite cult following. Customers also pay about $39 a month to stream live classes that the company produces using its own instructors. Its new treadmill product will cost about $4,000.

The company is on pace to generate more than $700 million in revenue in the fiscal year ending next February, continuing its more than 100% year-to-year revenue growth rate, according to the WSJ.

How? Through brilliant marketing and an increasingly loyal customer base. As this NYT feature said, “Peloton does not sell just a simple piece of hardware. Instead, the company spent tens of millions of dollars creating an inviting experience, complete with brand-ambassador celebrities and high-end retail locations.”

VENTURE DEALS

• Xpeng Motors, a China-based electric car startup, raised 4 billion yuan ($587 million) in its funding, valuing the electric car startup at nearly 25 billion yuan ($3.6 billion). Primavera Capital Group led the round, and was joined by investors including Morningside Venture Capital and Xiaopeng He. Read more.

• Namely, a New York-based operator of an online human resource software platform , raised $60 million in funding. Investors include GGV Capital, Tenaya Capital, Sequoia Capital, Matrix Partners, True Ventures, and Scale Venture Partners.

• Stampli, an interactive invoice management platform for mid and large enterprises, raised $6.7 million in Series A funding. SignalFire led the round, and was joined by investors including Bloomberg Beta, Hillsven Capital, and UpWest Labs. Financial terms weren't disclosed.

• Shedul.com, a booking platform for salons and spas, raised $5 million in funding. Target Global led the round, and was joined by investors including FJ Labs.

• Calcivis, a Scotland-based medical device company, raised 3.15 million pounds ($4.1 million) in funding. Investors include Archangel Investors, Julz and the Scottish Investment Bank.

PRIVATE EQUITY DEALS

• Duckhorn Wine Company, which is backed by TSG Consumer Partners, acquired Kosta Browne, a California-based winery. Financial terms weren't disclosed.

OTHER DEALS

• Didi Chuxing and Alibaba’s Ant Financial are in talks with Ofo, a China-based bike-sharing startup, for a joint buyout offer that could value Ofo at up to $2 billion. Read more.

IPOs

• Forum Merger II Corp., a New York-based black check company, raised $200 million in an offering 20 million units priced at $10. Marshall Kiev and David Boris back the company. Jefferies is underwriter. It plans to list on the Nasdaq as “FMCI.U.” Read more.

• Elanco, the Greenfield, In.-based animal vaccines maker spinning out of Eli Lilly, filed to raise $100 million in an IPO. The firm posted revenue of $2.9 billion in 2017 and loss of $310.7 million. Goldman Sachs, J.P. Morgan and Morgan Stanley are underwriters. It plans to list on the NYSE as “ELAN.” Read more.

• M17, a Taipei-based live-streaming firm, withdrew its $83 million IPO after postponing the offering in June. The firm planned to offer 7.51 million ADSs priced between $10 to $12. The firm posted revenue of $90.1 million in 2017. Vertex Asia Fund (12.1%), Infinity Ventures (9.1%), and KTB Asia Fund (5.7%) back the firm. Citigroup and Deutsche Bank Securities are underwriters in the deal. The firm planned to list on the NYSE as “YQ.” Read more.

• Pacific City Financial, the Los Angeles-based banking holding company largely catering to Korean Americans, plans to raise $50 million in an IPO of 2.4 million shares priced between $20 to $22. It posted $1.4 billion in assets. Keefe Bruyette Woods, Raymond James, and Sandler O'Neill bookrunners. It plans to list on the Nasdaq as “PCB.” Read more.

EXITS

• Global Payments Inc agreed to acquire AdvancedMD, a South Jordan, Utah-based provider of medical office software, from Marlin Equity Partners. The deal is valued at $700 million.

• IHS Markit Ltd acquired Ipreo, a New York-based financial services solutions and data provider, for $1.855 billion. The sellers were BlackStone and Goldman Sachs.

• Siemens will acquire Mendix, a Boston-based software firm, for $730 million in cash, Mendix had previously raised approximately $38 million in venture funding from investors including Battery Ventures and Prime Ventures.

• ArcLight Capital Partners acquired Midcoast Operating LP, a Houston, Texas-based owner of midstream assets, from Enbridge Inc for about $1.1 billion in cash.