The Growth Equity Docket Vol. 1 No. 8 — Tax Relief, Mega-Deals and the Cost of Lost Confidence

California voted on whether to tax wealth and said no. Prop 40 failed [52 to 48], and Prop 42 wrote the no into the constitution [51 to 49]. Washington changed hands [in both chambers]. The first result changes how my clients plan and the second changes who asks them questions, and that is as much politics as this letter will carry. The deal market did not pause. Marvell signed $115 billion in stock for Lumentum on Sunday night, the largest semiconductor deal on record, and behind it came a $17 billion strategic deal, a $15 billion take-private, a $9 billion sponsor exit, a $1 billion round at $40 billion, and the wind-down of a firm that sat across the table from me for twenty-five years. 

California: The Door Closes on a Wealth Tax 

For a month the question from founders was whether to leave by December 31. As of this morning, no. 

Prop 42 is what matters now. It bars new state taxes on the ownership of business interests, investments and retirement accounts, and bars retroactive taxes. The legislature cannot try again without the voters. Prop 3 made the 13.3 percent top bracket permanent, so the West Coast is not getting cheaper. It is just not confiscating balance sheets. Stop the exit conversation; finish the estate plan. 

Washington, in two sentences. Carried interest and qualified small business stock do not move, because divided government cannot pass a tax bill; what moves is oversight. The date that matters for anyone with an IPO queued behind Anthropic is December 11, when government funding runs out and with it the SEC’s ability to review a registration statement. 

Weil: When Faith Goes, Everyone Goes 

Weil, Gotshal & Manges told its partners last Wednesday that it will wind down. For most of my career it was one of the two or three firms a sponsor called first. It looked for a merger partner. No one would combine with it on acceptable terms, and once that was known, the partners who could leave did, by Monday in groups of forty. The partner vote had still not been held Tuesday morning; staff have been promised ninety days of pay, and the Boston office alone has about fifty jobs at stake. 

I take no pleasure in it. But the mechanism is the same one that takes down a portfolio company. A professional firm’s only capital is the belief of the people inside it that the others will stay. The failed merger told everyone the same thing at the same time, and after that each partner’s rational move was to go before the next one did. Nobody voted to dissolve the firm. They voted with their feet, and the dissolution was the sum. 

Read it as a diligence memo. Founder-led companies with a handful of key relationships have the same balance sheet: the value is the people, and the people stay only while they believe. Vesting and non-solicits slow a stampede; a credible plan announced before the doubt sets in stops one. If you have live matters at Weil, find out this week who holds the pen and where your team lands. 

The Legal Bench 

The seat is moving. The pattern this week is retirements at the large caps and first hires at the venture-backed. 

🔹 Dell named Christopher Garcia Chief Legal Officer effective February 1, succeeding Richard Rothberg, who ran legal through the EMC deal and the VMware spin. TE Connectivity named Jennifer Johnson Chief Legal Officer; Johnson Controls named Katie Rowen from Vontier. 

🔹 Lockton named Sara Romine Chief Legal Officer, succeeding Trey Humphrey after 26 years. Lockton hosts our CFO Forum on November 18. 

🔹 Candel Therapeutics brings in Maria Ostrovsky as General Counsel from Deciphera. Caldera Therapeutics, going public through its merger with Synlogic, named Lee Giguere Chief Legal Officer: a first senior legal hire timed to a listing. 

🔹 Anthropic’s S-1 drafts show the general counsel changed mid-review: Elena Leichty replaced Jeffrey Bleich on the cover in August. 

🔹 Departures. HubSpot’s chief legal officer leaves Friday with a search underway; Teladoc’s left Sunday; BuzzFeed’s leaves Friday; LendingTree’s leaves at year end. Four public companies without a sitting general counsel in one week is a hiring market. 

A first senior legal hire at a company with institutional capital usually means a transaction within two years. If you have a move to announce, send it to me. 

The Tape 

🔹 Marvell and Lumentum, $115 billion. Signed Sunday night, announced Monday with both companies’ earnings. All stock, a fixed 4.5 Marvell shares per Lumentum share, about $1,132 and a 24 percent premium to the price before the leak; the thesis: copper is running out of reach inside the AI rack, light takes over, and Marvell wants to own the path from the chip to the laser. Two things for dealmakers. The leak: talks were reported October 28, Marvell lost 27 percent by signing, and the fixed ratio passed most of that to Lumentum holders before they voted. The fees: $5.8 billion if Marvell walks, $2.9 billion if Lumentum does, $3.2 billion if regulators stop it, with an outside date that can roll to August 2028; a reverse fee that size says the risk is in the foreign reviews, which the filing does not name. By Monday’s close Marvell was down another 13 percent and Lumentum 19 percent, which is what a fixed ratio does on a day the chip index falls 3 percent to its lowest since April; two banks cut Marvell to hold Tuesday morning and one cut Lumentum. It is still the first time an optical-components company has been the prize rather than the afterthought. 

🔹 Anthropic, Amendment No. 1. Filed Monday with the third quarter in it and the price range still blank. Revenue was $17.0 billion for the quarter, up 47 percent from the second. Separate the accounting from the cash: the $23.3 billion GAAP net loss is mostly the $21.9 billion non-cash mark on the company’s own convertibles, the one I flagged last week, and the operating line went to a $567 million loss on about $5 billion of short-term compute bought above multi-year prices. On a cash basis the business made money: $2.5 billion of adjusted operating income and $6.6 billion of operating cash flow for nine months, with $146.6 billion of liquidity. The number that will run the roadshow is the commitments: about $895 billion of contracted compute, $69.8 billion of it due in the next twelve months, with Broadcom, Google, Amazon, SpaceX and Microsoft on the other side. Read that against a new risk factor that the compute partners depend on third-party financing, and the FT’s weekend report that Blackstone has told its investors the company may not earn an investment-grade rating. Latest news reports show that investors are pushing back on a $2T valuation and the new whisper number is $1.5T.  The equity story is growth. The credit story is the one to underwrite. 

🔹 The multiple. Rob Bartlett, who runs software coverage in Jefferies’ technology banking group in San Francisco, sent his November valuation update Monday. Three numbers. Since ChatGPT launched, the eight AI darlings are up 608 percent and horizontal application software is up 12; in the last year security software is up 48 percent and application software is down 26. Multiples are off 19 to 31 percent across every vertical, with application software at 4.2 times forward revenue and only three public companies, Broadcom, DigitalOcean and Palantir, growing faster than 40 percent. Companies with 20 to 30 percent free cash flow margins have doubled since 2021, and a point of growth is still worth 1.5 points of margin. The takeaway for growth investors: the public market has already decided which software companies are AI companies. Price your rounds off the 4.2, not the 18.6 the hypergrowth bucket gets. Write to me for the report and I will connect you with Rob. 

🔹 DoorDash and Instacart, $17 billion. $65 a share in cash, stock or a mix, stock capped at a quarter, a $13 billion JPMorgan bridge, no financing condition, closing guided to late 2027 for antitrust. Consideration elections are back, and the proration and collar negotiations with them. 

🔹 ADT, $15.3 billion. Thrive Holdings, with Apollo financing, at $10 a share, a 45.6 percent premium, go-shop through November 28. A go-shop that long is a board building a record. 

🔹 Growth rounds. Kalshi raised $1 billion at $40 billion on the day Utah charged it criminally; read the conditions to closing. Wabi, the consumer AI assistant founded by Replika’s Eugenia Kuyda, raised $55 million at a $1.25 billion valuation led by IVP, with Andreessen Horowitz, Forerunner and the Amazon Alexa Fund; a seed round at a unicorn price is the current market for a founder with a prior exit. 

🔹 Monday’s tape. Oracle sold $10 billion of stock at $116, 11 percent below Friday’s close, and $10 billion of notes the same day; the AI buildout is now financed with equity at the top of the stack, and the market charged for it. Salesforce agreed to buy Cresta, the voice AI company, for about $2.7 billion, and CrowdStrike said Tuesday it is buying Fiddler AI and Dreadnode, model observability and AI red-teaming, mostly in cash: the security buyers are now buying the tools that test the models. Lonza is taking Merck KGaA’s five U.S. CDMO sites for mid-hundreds of millions of euros. LS Power, which holds 57 percent of EVgo’s vote, proposed to take it private at $2 a share; a special committee was formed. Palantir reported revenue up 96 percent. The Nasdaq 100 closed in correction, 10 percent off its October 6 high. 

🔹 The window. OPay priced a $304 million IPO and withdrew it hours later; nothing prices this week. The Journal reported Monday night that investors are pushing Anthropic toward a $1.5 to $1.6 trillion valuation after the selloff, with a range rather than a price expected and the roadshow still set for the week of November 9. Meta announced a $95 billion equity plan and S&P went to negative outlook, and in Chancery the plaintiffs challenging its Class C dividend moved to expedite ahead of the January effective date. AI infrastructure is a credit market now. 

🔹 The Loan Desk. Third-quarter GDP was 3.4 percent and October ISM manufacturing printed 55.5, a beat. The Fed held at 3.75 to 4.00 percent with two dissents for a hike; futures put a December hike at 77 percent. October jobs come Friday, consensus about 63,000; CPI is the 10th. The 10-year opened Tuesday at 4.91 percent. 

From My Desk 

🔹 Thank you to everyone who joined Friday’s GC Executive Forum lunch at Wayfare Tavern, and to Kelly Boyd, Kelly Kriegshauser, Andrew Stephens and Eric Chiu for the panel. 

🔹 Congratulations to Wabi on its $55 million round. My partner Brian Wheeler led the Foley team, with Scott Lin, Wesley Choi and Rachel Horewitz. 

🔹 My long read on Cloudflare and the limits of Delaware’s safe harbor publishes this week. 

🔹 Prefer this in your inbox? Subscribe on Substack. The Docket lives at louislehotattorney.substack.com/p/the-growth-docket. 

On the Calendar 

1. CFO Executive Forum: The CFO Risk Stack from Series B to S-1, Wednesday, November 18, 5:30 pm, Lockton, San Francisco. Hosted by Foley, Lockton, Protiviti and First Citizens Innovation Banking; produced by the Open Future Forum. Request a seat. 
2. GC Executive Forum Lunch, Friday, December 4, Hotel Nia, Menlo Park. Reply for a seat. 
3. 2027 Outlook, Friday, December 11. Reply for a seat. 
4. JPM Week Reception, Sunday, January 10, San Francisco. Reply for a seat.
5. GC Summit, wine country, early 2027. Save the date next week. 

Closing Argument 

🔹 Founders: the wealth tax is gone and the constitution says it stays gone. Finish the estate plan anyway. 

🔹 Boards: a fixed exchange ratio is a bet on the buyer’s stock from the day the news leaks. Lumentum’s holders gave back most of their premium before the press release. Collars exist for a reason. 

🔹 Investors: a company’s key people stay only while they believe. Weil is the proof. Diligence the belief, not just the contracts. 

A question for you. Would you take a fixed exchange ratio in a market like Monday’s? Write back; I read every reply. 

The voters said no to the tax. The market said yes to size. Build accordingly.