Term Sheet — Wednesday, August 29

CRUNCHING THE NUMBERS

Amidst all the back and forth about whether Elon Musk cried or did not cry during his recent New York Times interview, my colleague Shawn Tully took a look at something much less emotional — Tesla’s numbers.

“Elon Musk has spread uncertainty by consistently promising production rates and financial performance that he fails to deliver, as well as pledging that Tesla needs no new capital, only to raise $8 billion in debt and equity over the past three years,” he writes.

Tully explains that opinions on what Tesla will do cover a gigantic spectrum, but what it has to do to enrich investors can be forecast with reasonable accuracy. So he did some math on how big and profitable Tesla must be to deliver even moderately good returns.

Some takeaways from Tully’s article:

— Assume investors will require a 8% return on their Tesla shares — which is probably a bare minimum given that this is the epitome of a high-risk stock — Tesla would need to grow its value by 51% by the end of 2024. By the end of that five year, four month period, Tesla’s market cap would need to reach $88 billion.

— Today, the world’s most profitable major luxury car producer is BMW, which posted after-tax margins of 8.8% in 2017. The view of many analysts is that Musk can advance not only automotive technology, but profitability, and they forecast net margins of 10% — which is a full 14% above BMW. In that case, Tesla would be generating sales of $53 billion in a little over five years. That’s an annual growth rate of 31%.

— To achieve that $53 billion goal, Tesla would need to grow its sales by $40 billion, and grab 30% of the premium car market. It would absorb no less than 54% of the category’s total growth over that period, leaving less than half for its competitors.

— As it stands today, a trio of luxury brands from three German carmakers BMW, Mercedes-Benz (Daimler), and Audi (Volkswagen), control almost 80% of the premium market, each holding between 23% and 26%. Tesla would need to steal around 14 points of share from the three German companies, or almost five points each.

“Tesla’s road to success also requires by 2024, something like half of all the premium cars on the road are electric vehicles, a multiple of today’s number,” Tully writes. “Elon Musk wants his investors to believe in miracles. He’ll need one to make his stock anything but a creaking jalopy in the years ahead.” Read the full analysis here.

REJECTED: Fast-food chain operator Yum China Holdings Inc has rejected a $17.6 billion buyout offer from a consortium led by Chinese investment firm Hillhouse Capital Group, according to Reuters. The deal would have been one of Asia’s biggest deals this year.

The Hillhouse-led consortium, which included Baring Private Equity Asia, KKR, and China Investment Corp, expressed an interest to offer $46 per share, or nearly 24% above Tuesday’s closing price, but the company’s board reportedly decided that the group provided no extra value or strategy for the business.

ASTON MARTIN’S ROAD TO IPO: After seven bankruptcies, Aston Martin is finally ready for its IPO. The British luxury carmaker will aim for a £5 billion ($6.4 billion) valuation and float at least a quarter of the stocks. CEO Andy Palmer wants to complete the IPO by the end of the year; a prospectus should be available around September 20. CEO

The company was unprofitable for six years before DB11 sales and a restructuring pushed the company back into the black in 2017. Aston sells roughly 25% of its cars to the EU and operates its only plant in Gaydon, central England, with a second one due to begin operations in Wales in 2019. So what will Brexit mean for the company?

“We can demonstrate that Brexit is not a major effect for us,” Palmer told Reuters. “If there is a tariff into Europe, it’s countered by a tariff into the UK for our competitors so you might lose a little bit of market share in the EU but you pick it up in the UK.”

VENTURE DEALS

• Outset Medical, a San Jose, Calif.-based medical tech company, raised $132 million in Series D funding. Mubadala Investment Company led the round, and was joined by investors including Baxter Ventures, Fidelity Management and Research Company, Partner Fund Management LP, Perceptive Advisors, T. Rowe Price Associates Inc. And Warburg Pincus.

• DFINITY, a Switzerland-based company that aims to build an open, decentralized blockchain that runs smart contract software, raised $102 million in funding. Andreessen Horowitz’s a16z crypto and Polychain Capital co-led the round, and were joined by investors including SV Angel, Aspect Ventures, Village Global, Multicoin Capital, Scalar Capital, and Amino Capital. Read more at Coins2Day.

• Cloudian, a Foster City, Calif.-based provider of cloud software solutions, raised $94 million in Series E funding. Investors include Digital Alpha, Eight Roads Ventures, Goldman Sachs, INCJ, JPIC (Japan Post Investment Corporation), NTT DOCOMO Ventures, Inc. And WS (Wilson Sonsini) Investments.

• Terra, a Singapore-based company that designed a price-stable digital currency for payments, raised $32 million in seed funding. Investors include Polychain Capital, FBG Capital, Hashed, 1kx, Kenetic Capital, Arrington XRP Capital and TransLink Capital.

• Lacework, a Mountain View, Calif.-based provider of cloud security solutions, raised $24 million in Series B funding. Sutter Hill Ventures led the round, and was joined by investors including Liberty Global Ventures, Spike Ventures, the Web Investment Network and AME Cloud Ventures.

• Shadowfax, an India-based logistics startup, raised $22 million in Series C funding. NGP Capital led the round, and was joined by investors including Qualcomm Ventures, Mirae Asset and Eight Roads Ventures.

• Tascent, a Los Gatos, Calif.-based provider of intuitive biometrics, raised $19.5 million in Series B funding. NEC Corporation and Tano Capital led the round.

• Indegy, an Israel-based industrial cyber security startup, raised $18 million in Series B funding. Liberty Technology Venture Capital led the round, and was joined by investors including O.G. Tech Ventures, Magma Venture Partners, Vertex Ventures and Aspect Ventures.

• New Knowledge, an Austin, Texas-based a cybersecurity company specializing in disinformation defense for brands, raised $11 million in Series A funding. GGV Capital led the round, and was joined by investors including Lux Capital.

• SOCi, Inc,, a social media and reputation management company for multi-location brands, raised $10.5 million in Series B funding. Vertical Venture Partners led the round, and was joined by investors including Grayhawk Capital, Blossom Street Ventures, and Tallwave Capital.

• Bark, a parental control app that monitors children’s email and social networks for potential safety concerns, raised $9 million in Series A funding. Signal Peak Ventures led the round, and was joined by investors including Two Sigma Ventures and existing investors including Symmetrical Ventures, Fuel Capital, Hallett Capital, and Atlanta Seed Company.

• Very Good Security, a San Francisco-based data security firm, raised $8.5 million in Series A funding. Andreessen Horowitz led the round, and was joined by investors including NYCA, Vertex Ventures, Slow Ventures and Max Levchin.

• Sempre Health, a San Francisco-based solution for behavior-based healthcare pricing, raised $8 million in Series A funding. Rethink Impact led the round, and was joined by investors including Social Capital.

• AirTM, a startup that provides financial services to consumers and businesses throughout Latin America, raised $7 million in Series A funding. BlueYard Capital led the round.

• TeleSense, a Sunnyvale, Calif.-based provider of environmental monitoring solutions for grain and food production, storage and transport, raised $6.5 million in Series A funding. Finistere Ventures led the round, and was joined by investors including Congruent Ventures, Maersk Growth, Rabobank’s Food & Agri Innovation Fund, Radicle Growth, Trailhead Capital and Plug and Play Ventures.

• Bridge Connector, a Palm Beach Gardens, Fla.-based provider of streamlined integration solutions for healthcare companies, raised $5.5 million in Series A funding. Axioma Ventures LLC led the round.

• DrayNow, a provider of technology-driven solutions for the intermodal freight industry, raised $5 million in Series A funding. Comcast Ventures led the round, and was joined by investors including Osage Venture Partners.

• Exabel, a Norway-based financial tech company, raised $4.7 million in funding. Investors include Vatne Equity, Andenæsgruppen, Sanden, Melesio Capital, Axan Invest, First Partners Holding 5, Holta Invest and LT Invest.

HEALTH AND LIFE SCIENCES DEALS

• Nanovis, a seller of nano-technology enhanced spinal implants, raised $5.5 million in funding. Investors include Elevate Ventures, 1st Source Capital Corporation, Purdue’s Foundry Investment Fund, Commenda Capital and Ellipsis Ventures.

PRIVATE EQUITY DEALS

• Avem Partners acquired Future Tech Metals Inc, a Riverside, Calif.-based supplier of roughing and finishing services for aerospace forging manufacturers. Financial terms weren't disclosed.

• Verscend Technologies, Inc, a portfolio company of Veritas Capital, acquired Cotiviti Holdings, Inc, an Atlanta-based provider of payment accuracy and analytics-driven solutions focused primarily on the healthcare industry. Financial terms weren't disclosed.

• Sotera Health, which is owned by Warburg Pincus and GTCR, is exploring a potential sale worth as much as $5 billion including debt, according to Reuters. Read more.

• Authentic Brands, a portfolio company of Leonard Green & Partners, made a $35 million offer for Brookstone Inc, a Merrimack, N.H.-based retailer that filed for bankruptcy earlier this month.

• Summit Partners acquired MercuryGate International Inc, a Cary, N.C.-based provider of SaaS-based transportation management system solutions. Financial terms weren't disclosed.

IPOs

• NIO, a Shanghai, China-based electric vehicles maker, says it plans to raise $1.2 billion in an IPO of 160 million ADSs priced between $6.25 and $8.25. The firm posted revenue of $7 million in the six months ending June, with loss of $502.6 million. Tencent (15.2% pre-offering) and Hillhouse Capital (7.5%) back the firm. Morgan Stanley, Goldman Sachs, and J.P. Morgan are underwriters. It plans to list on the NYSE as “NIO.” Read more.

• X Financial, a Shenzhen, China-based peer-to-peer lending platform, filed for a $250 million IPO. It posted revenue of $270.1 million in 2017 and income of $51.3 million. Deutsche Bank and Morgan Stanley are underwriters. It plans to list on the NYSE as “XYF.” Read more.

• Viomi Technology, a Guangdong, China-based maker of smart home appliances, filed for a $150 million IPO. It posted revenue of $132 million and earnings of $14.1 million in 2017. Xiaomi backs the firm. Morgan Stanley and CICC are underwriters. It plans to list on the Nasdaq as “VIOT.” Read more.

EXITS

• Polaris agreed to buy Falck Safety Services Holding A/S, a Denmark-based provider of safety training for the offshore, maritime and renewables industries. Falck Group was the seller.

FIRMS + FUNDS

• The Riverside Company, a New York-based private equity firm, raised $1.2 billion for its Riverside Micro-Cap Fund V (RMCF V).

• Northwestern Mutual, Advocate Aurora Health, Foxconn Technology Group and Johnson Controls are each contributing $25 million to create a new $100 million Wisconn Valley Venture Fund.