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NEW YORK, March 27 (Reuters) - Johnson & Johnson (JNJ.N), opens new tab will get a new chance to contest the scientific evidence linking talc products to ovarian cancer, a federal judge ruled on Wednesday, potentially disrupting a federal court case that consolidates 53,000 lawsuits.

Tech giant’s total stake grows to $4 billion, its largest investment in another company

Amazon.com AMZN 0.56%increase; green up pointing triangle said it has invested an additional $2.75 billion in the artificial-intelligence startup Anthropic, a major investment from a tech giant looking to compete with Microsoft, Google and others in the AI arms race.

Amazon has now invested a total of $4 billion in Anthropic after making a $1.25 billion initial investment in the company in September. Amazon said it has a minority ownership position in Anthropic.

The funding marks Amazon’s largest investment in another company since the online retailer was founded nearly 30 years ago.

Tech companies and venture capitalists have been throwing money at AI startups following the success of Open AI’s ChatGPT, with investors and analysts increasingly believing the latest boom in AI is sustainable. More than $29 billion was invested in generative AI companies last year, according to research firm PitchBook.

Anthropic, which was founded in 2021, offers an AI assistant called Claude that competes with OpenAI’s ChatGPT. The company is led by siblings Dario and Daniela Amodei, who both used to work at OpenAI.

About 70% of the country is suffering from abnormally dry or drought conditions, forcing it to start up old gas-fired power plants

The Canadian province of Quebec has big plans of becoming the “battery of the U.S. northeast” by feeding power generated from its dams and other hydro plants to millions of people in Vermont, Massachusetts and New York state. But dry conditions that have affected energy output worldwide are forcing one of the world’s largest hydropower producers to cut exports.

“There wasn’t enough snow or rain in the regions where we needed it,” said Michael Sabia, chief executive of Hydro‑Québec, the provincial utility. “We can’t make it rain, as much as we’d like to.”

Elsewhere, China, India and the U.S. in 2023 all recorded decreases in their hydro production for the same reason, contributing to a record global decline in hydropower generation, according to the International Energy Agency. Many countries resorted to fossil-fuel electricity generation to make up for the hydro shortfall, which drove up carbon-dioxide emissions by 170 megatons in 2023, roughly equal to the annual emissions from 40 million gas-powered cars.

“Drought is a big concern,” said Lei Xie, a researcher with the International Hydropower Association, a London-based nonprofit group. She said it is becoming more difficult for forecasters to model the extremes of climate change, and predict from year to year how much electricity local hydroelectric systems will generate.

Canada bet heavily on hydro as a means of cleaning up its carbon footprint; it is the third-largest hydroelectricity producer in the world. But with the climate becoming markedly drier in recent years, Canada’s utilities are now investing hundreds of billions of dollars to diversify their grids, in some cases leaning on power plants fueled by gas or coal to meet mushrooming demand.

Hydro power from the thousands of rivers and streams that crisscross the country normally provides about 60% of the country’s electricity. The country’s resources are enormous. The water reservoirs in Quebec alone collectively cover more than 4,600 square miles, almost double the area of Delaware.

But drought conditions extending from the west coast to the east are so bad that rivers and lakes in parts of Canada are drying up. Provincial authorities have cut back on exports, and, in some cases, turned to backup generators.

Étienne Boucher, a professor at the University of Quebec in Montreal, said water flows into Quebec’s reservoirs fell far below the mean levels observed between 1980 and 2000.

While one bad year shouldn’t cause too much worry, the north often has periods of persistent drought, and climate change could make those dry periods much worse, threatening the sustainability of Quebec’s hydro supply, said Boucher.

“There’s still a lot of uncertainty when predicting water flows in the north,” he said. “The past is becoming less of a good analogue for what is going to occur in the future.”

The impact threatens to undermine Canada’s reputation as a stable provider of clean and sustainable energy and risks derailing the country’s efforts to cut greenhouse-gas emissions.

“Canada has historically been seen as a hydroelectricity superpower, but this narrative has shifted,” said John Pomeroy, a director at the University of Saskatchewan’s Centre for Hydrology, which studies water flows and climate change. “In parts of the country, conditions are truly disastrous.”

The province of British Columbia, Canada’s second-largest hydro producer, has been in a drought since the middle of 2022. Water levels in the giant reserves in the northern and southeastern regions of British Columbia have fallen because there has been less snow in the winter and less rain in the spring, forcing the province to conserve water, said a spokesman for BC Hydro, the provincial utility.

In the 142-mile long Arrow Lakes Reservoir, which is part of the Columbia River system that provides almost half of the province’s power, waters this past summer receded to reveal old building foundations and the rusted husks of tractors that were drowned when the area was flooded in 1961, said Victoria Youmans, a resident of the village of Nakusp, which sits on the eastern shore of the lake.

With water levels so low, BC Hydro had to import almost one-fifth of the power residents and businesses used in 2023 from the neighboring province of Alberta and U.S. states from across the border, much of it produced by fossil fuels.

It has been a persistent problem. Despite having a quarter of all of Canada’s fresh flowing water within its territory, the province has had to import power for seven out of the last 15 years, according to David Hughes, the founder of Global Sustainability Research, a consulting company.

Although some of the most severe global effects are tied to the short-term effects of El Niño—a climate pattern that often ushers in periods of intense drought—parts of Canada, especially in the north, have been struggling with an extended, multiyear decline in the critical water sources such as mountain snowpacks that feed hydro reservoirs.

Roughly 70% of Canada was abnormally dry or in moderate to exceptional drought at the end of January, according to the Government of Canada. Dry conditions have strained the biggest hydroelectric utilities in the country in British Columbia, Manitoba and Quebec, provinces where residents and businesses get almost all their power from hydro.

Downstream from British Columbia, the province of Manitoba in the fall fired up a natural-gas power plant it normally only uses during the coldest winter months to make up for a shortfall in hydro production.

Canada’s largest hydro producer, Quebec, has staked much of its economic future on its ability to deliver clean energy to residents and businesses. The province has pitched itself to emissions-conscious battery manufacturers and mining companies as a provider of clean electricity with rates that are among the lowest in North America.

It has also been hoping to export power to power-hungry U.S. states, marketing itself as a virtually unparalleled provider of abundant and reliable renewable power. The province has signed long-term contracts with Massachusetts and New York state to provide roughly 20 terawatt hours of power to the states, enough to provide electricity to 1.6 million homes for a year.

The province also makes money by selling extra energy on short-term spot markets, but a lack of snow and rainfall in the northern reaches of the province lowered water levels in Quebec’s massive reservoirs, which forced the province to cut the amount it sold on those markets, costing it roughly $400 million in lost revenues from those sales last year, an 18% decrease from 2022.

Sabia, the Hydro-Québec CEO, said that dry conditions in the province aren’t yet at crisis levels, but he also noted that its existing hydro capacity, already among the highest in the world, isn’t enough to meet growing demand. To expand the grid and keep a promise to become a net-zero emissions jurisdiction by 2050, the province has said it would invest more than $80 billion over the next decade to boost capacity across a range of sustainable power sources and install wind turbines, solar farms, upgrade existing hydro dams and build new ones.

“It’s a lot of money,” said Douglas Offerman, an analyst with Fitch Ratings. Lower exports combined with pressure to tap new power sources is threatening to stretch government balance sheets already pressured by an aging population and the need to upgrade social services and urban infrastructure.

“They’re adding a big-ticket item to an already long list of priorities,” Offerman said.

The market for initial public offerings is crawling out of a two-year slumber, invigorated by the debuts of Reddit and Astera Labs. But most startups valued at $1 billion or higher won’t go public soon, predicts Accel partner Rich Wong.

Of the 1,200-plus private startups that now have this valuation, he estimated far fewer than 20% will end up going public in the next few years. Many of the rest may be sold or will just stay private for longer. That’s because they haven’t started to generate enough revenue—say, at least $250 million annually—or shown they’re close to turning a profit, two characteristics public market investors want to see. Plus, the market can only handle so many new tech listings a year.

“The IPO destination is going to be very much for a small minority of that 1,000-plus unicorns,” Wong said on a call with Morgan Stanley Managing Director Diana Doyle, streamed to The Information’s subscribers Tuesday.

The Takeaway

•Reddit, Astera pave way for ‘super busy’ 2025

•New listings should show at least $250 million in revenue

•Many high-valuation startups likely to continue to delay offerings

There’s a silver lining to his forecast. Wong, who led Accel’s investments in the now-public enterprise software companies Atlassian and UiPath, anticipates some of the startups that remain private will use the time to develop their businesses. Then they may debut in a few years as much stronger companies. That would repeat what happened in the 2010s when startups such as Zoom, Datadog and Slack waited to list until they were larger companies—and in Zoom’s case, were already profitable.

That said, some 15 to 20 tech companies will attempt IPOs this year, said Doyle, who is head of technology and equity-linked capital markets in the Americas at Morgan Stanley. She added, “2025 is going to be super busy.” Investors are interested in new tech listings as long as they can show healthy growth.

“Over 50% of the tech companies out there are growing below 10%; only 5% of tech companies are even growing more than 40%,” she said. “The biggest thing that’s missing from the public markets right now is growth.”

Wong and Doyle also spoke about opportunities for acquisitions of startups, including by newly public companies such as CrowdStrike and Atlassian; on whether artificial intelligence fever has started to ebb; and on private equity firms’ appetite for private tech startups.

The interviews have been edited for brevity and clarity.

What is the reaction from the venture capital community for these IPOs?

Wong: Reddit is a particularly positive example, given there haven’t been as many consumer IPOs over the past three to four years. There’s not enough data points to draw a full trend yet. But if you go back to Instacart and Klaviyo, venture-backed IPOs of last year, you’re starting to see a trend warming up.

The second half of the year and particularly 2025, I think you’re gonna start to see real momentum there if these names continue to trade as they have so far.

Why aren’t more companies thinking about IPOs this year?

Doyle: On the company side, many of the companies that planned to go public in 2023 or 2024, they raised money in 2020–21 at all-time-high valuations with the expectations at the time [that] they’d have three to four years of runway. Most of those companies have taken cost cuts [to extend the runway] by another 18 months, so there hasn’t been a real need for cash.

The second component is the private markets have been very healthy, [giving] many of these companies access to liquidity for early investors or for employees, so that they can buy time for the growth to stabilize and for the company to continue to build scale. Some of the other things that have held companies back from pulling the trigger, despite the fact that investors are willing to support these offerings, it’s just the valuation. Valuations have returned to more normal averages, especially in enterprise software, but they’re still challenging for some companies.

I think we’ll see 15 to 20 tech IPOs this year. 2025 is going to be super busy. Practically speaking, unless the company is already on file, it’s about a six-month preparation period from the time you decide to go public, getting through the whole process with the [Securities and Exchange Commission], meeting investors and getting ready to go. So that six months from now brings us basically to the election—there’s a narrow window, post election, before you get into the holidays. But for a lot of these companies, it’s a Q1 2025 target.

What are the companies you’ve been working with doing before the IPO market reopens?

Wong: In the roughly 18 years I’ve been in the industry, I’d say these companies are better managed than [at] any other point in terms of controlling their burn and making their capital last a long time. The vast majority of companies are not under cash pressure that we would have seen in previous cycles.

The market until very recently, until Q4 of ’23, has been kind of frozen. Only now are we starting to see the ice kind of crack, and you’re starting to see some of these late-stage rounds and activity come back in quite a bit of force.

Is it just AI companies that are able to raise those big rounds right now?

Wong: We’re seeing activity across the board, collaboration software, [application programming interface] companies, cybersecurity companies—those are some of the most active areas in addition to AI.

Even the high quality venture-backed businesses have either sold secondary or raised primary in a significant down round. How are companies thinking about their valuations and plans to raise capital publicly?

Wong: If you can grow a company at 30% to 40% year over year and approximately double every other year, you want to grow a little towards some of the peak 2020 and 2021 valuations.

At the same time, four years out from Covid-19, people are also coming to the reality that those zero-interest-rate multiples are probably not going to come back anytime in the near future. And so you just have to accept the reality of how the multiples have changed.

I make the observation that all of us as public stock investors—you accept it when there’s a correction and multiples change and your stock price may be down 50%, 60%. You realize that’s not a function of a company’s performance, but more the macro of interest rates and environment. Oddly enough, as private investors, it’s harder to accept or whatever reason. People are still mentally pegged to the last VC round.

What are the qualities of companies that are distinguishing themselves as IPO or public market ready?

Doyle: Ideally 30% to 40%–plus growth with revenue, for a traditional software company, $200 million–type plus. Investors want to see either profitability today or a real line of sight to profitability within the next, say, four quarters. They want to see companies that are a market leader and who offer something different. For companies that meet that profile, the investor enthusiasm is going to be highest, in addition to companies who have an AI direct story that investors can understand and articulate.

Wong: Less than 20%, maybe less than 10% of the so-called unicorns are realistically going to end up in the independent public market. There probably is a good substantial percentage that will end up selling to different acquirers. Is that 40%, 50%, 60% of that remaining base? And there’s a good 25% to 30% of those so-called unicorns that we all know in retrospect didn’t really make economic sense and were priced way above where they stood at that point. So I think the IPO destination is going to be very much for a small minority of that 1,000-plus unicorns.

If you think back to about a decade ago, Mark Zuckerberg was not very excited about going public and was very vocal about that in the startup community at the time. And that actually, I think, caused a lot of other companies to go relatively slow in that 2009–12 time frame. What ended up happening, as a lot of people slowed down or delayed their paths to IPO, is that you actually had the time for these companies to become quite attractive businesses.

A lot of those companies use that four or five years when things were pretty quiet to build up their businesses and actually cross into cash flow positive and eventually profitability. There are real businesses being built that are $200 [million], $300 [million], $400 million, and many of them are starting to cross to cash flow positive. So I do think ’25, ’26, ’27 will have very good feedstock for those markets at that time.

What are the possibilities to exit via mergers and acquisitions?

Wong: The big tech players appear to be under quite a bit of scrutiny. Those have traditionally been the high-priced acquirers of many of our startups. But there is another generation of folks that are emerging, I think the CrowdStrikes of the world, they’re about $80 billion market cap, or Atlassian at $50 billion, the Oktas, the Twilios, started to look at some of the smaller startup companies. So I think you’re gonna see a new generation of acquirers from the five- to seven-year-ago IPO class—they themselves will perhaps do smaller acquisitions.

Will private equity ever go unicorn shopping?

Wong: I wouldn’t say it’s a dramatic change now from a year ago, two years ago. Those teams are very professional and are always looking at smaller businesses for tuck-ins, and are looking at more of the platform businesses that are $200 [million to] $300 million–plus in size. And so you know, there is a constant dialogue of their interest, where there’s late-stage private or public.

Are we in the trough of disillusionment for AI?

Doyle: There’s just a huge enthusiasm and a fear of missing out with AI. The challenge with wanting to invest in AI, whether it’s in the private or in the public markets, is that so many of these businesses are not at scale, not at maturity yet. And in many cases, the public market investors are going to be cautious about—even with the hype around AI—investing in something where the vision takes more than a couple years to play out. Astera is an example of an infrastructure play on AI, where it’s a way for investors to participate in the secular theme, but with a physical product.

You're going to see the companies who have the physical infrastructure for AI be the first to demonstrate the scale and the success that investors in the public markets are going to want to see. The software layer is what’s going to come next, and there’s certainly an excitement for those businesses. But the proof points are still to come.

What do investors want to see from companies going public in terms of structure?

Doyle: On the traditional IPO deal structure, the pendulum has swung back from issuers to investors. They want a traditional lockup structure, where maybe you can have early release for a certain portion of nonofficer employees, but a much more traditional lockup structure. Investors want to see enough reasonable float where securities can trade well on the secondary market. Most companies have opted for things that are more investor friendly. It just takes deal structure off the table.

Wong: Maybe a decade ago, we used to talk about getting to $100 [million to] $150 million of top line as at least a minimum bar for a company before trying to take it public. I think that bar has been raised quite a bit where it’s not a lot of fun to go out there in the open ocean as a $1 billion, $1.5 billion market cap company. It’s really hard to get the attention of the major fund managers that matter, even the small-cap fund managers.

And so I think, you know, if we want to rewind and have the benefit of history, I would say you want to be quite a bit larger before you try to test the public markets, at least $250 million to $300 million of top line, ideally being cash flow positive.

Doyle: There are already so many things in the public markets that investors can choose from and buy. To come out with an IPO story, you want to give something to investors that they don’t already have access to buy. The biggest thing that’s missing from the public markets right now is growth. Over 50% of the tech companies out there are growing below 10%; only 5% of tech companies are even growing more than 40%. If you’re a company preparing to go public and can show sustainable growth, the market is in an environment right now where investors are willing to lean in for growth, they want to see profitability, and they want to see some minimum standard of efficiency.

The British boxmaker’s shareholders should be wary of a suitor willing to overpay to stay in the game

For DS Smith shareholders the packaging may matter more than the paper when comparing competing efforts to buy the company.

The British boxmaker said on Wednesday it had received a second all-share offer, this time from International Paper. The US pulp and paper manufacturer has proposed paying 0.1285 shares for each in DS Smith, worth about 415p as of Monday’s close. That valued DS Smith at £7.5bn ($9.5bn) including net debt, with a per-share price about a tenth above UK rival Mondi’s approach in February.

But a fall in International Paper’s shares has cut its pitch to just under 400p. Mondi’s shares rose slightly. The gap between the two deals on Wednesday was closer to 4 per cent. And the contrasting reactions in the would-be buyers’ share prices reflect the options on offer to DS Smith.

Both deals are defensive, rooted in the need to consolidate given excess industry capacity and peaking demand for cardboard and paper. But a tie-up with Mondi would create a European champion, and with it cost savings. The pair have a mismatch in containerboard production: DS Smith consumes more of this raw material than it makes and the opposite is true for Mondi. Putting them together should mean reduced reliance on market prices and lower earnings volatility.

Mondi has not provided details on the cost savings from a tie-up. Jefferies puts these at £350mn annually or some 4 per cent of DS Smith’s sales. Taxed and capitalised these are worth about £2.5bn — a large chunk of which has already gone to DS Smith shareholders with shares trading at a £1.4bn premium to their undisturbed price. Mondi may not have much room to bump (unless it can find bigger cost savings) but it may not need to.

In a sector under pressure, the question is how International Paper justifies its higher offer. The group has a European operation but its smaller size suggests more limited opportunity for savings.

Ireland’s Smurfit Kappa, which International Paper tried to buy in 2018, expects to generate savings of $400mn in the first year from its $20bn tie-up with US group WestRock — about 2 per cent of the target’s sales, with a bigger overlap than DS Smith and International Paper.

The US paper maker may not want to be left alone as the world of cardboard couples up. A Mondi/DS Smith combination would be too big for a subsequent deal. DS Smith shareholders should be wary of a suitor willing to overpay simply to stay in the game.

Liberty Media in exclusive talks to buy the Madrid-based company behind the motorcycle racing series

Formula One owner Liberty Media is in exclusive talks to buy the company that owns MotoGP for more than €4bn, in a deal that would unite the elite car and motorcycle racing series, according to people familiar with the matter.

Liberty, which is chaired by telecoms and entertainment billionaire John Malone, is poised to agree the takeover of Dorna Sports after seeing off a rival bid from TKO, the sports and entertainment group run by Hollywood powerbroker Ari Emanuel, the people said.

Qatar Sports Investments, the state-backed group that owns French football club Paris Saint-Germain, had also expressed interest in Dorna and held talks with its owner, Bridgepoint, the private equity firm.

Madrid-based Dorna represents a rare opportunity to buy into a global sport with lucrative commercial rights. Dorna promotes several competitions, including the Superbike World Championship and an electric biking series called MotoE. It organises 251 races a year in 20 countries.

Any deal, however, is likely to face regulatory scrutiny. Private equity firm CVC Capital Partners once owned both F1 and MotoGP but was forced to sell the motorcycle series in 2006 as a condition of buying F1 after EU competition regulators raised concerns. CVC sold F1 to Liberty in 2017 in a deal worth $8bn.

James Killick, competition lawyer at White & Case, said that the history of F1 and MotoGP and the size of a potential combined group made competition probes “quite likely”, both in countries such as the UK and Germany, and at an EU-wide level.

“I’d be very surprised if competition regulators didn’t look at it”, he said. “The question is has the market changed?”

Bridgepoint and the Canada Pension Plan Investment Board are the major shareholders in Dorna. Dorna’s management, including chief executive Carmelo Ezpeleta, are also shareholders. Ezpeleta has led Dorna for 30 years, echoing how Bernie Ecclestone dominated F1 for decades.

Bridgepoint, CPPIB, Dorna, Liberty Media, F1, TKO and QSI declined to comment.

Liberty’s offer values Dorna at more than €4bn, including debt. An agreement is close but an announcement could be pushed into next week, one of the people cautioned.

Buying MotoGP would give Liberty Media, led by chief executive Greg Maffei, the chance to prove that its success in growing the popularity of F1 was not a one-off.

Like F1, the MotoGP business model revolves around broadcast rights, fees from racing circuits, sponsorship, corporate hospitality and merchandising.

Under Liberty, F1 has made promoting the sport on social media a priority and gave Netflix unprecedented access to make the reality series Drive to Survive.

The programme focused on the drivers, team bosses and owners and has been credited with growing the sport’s fanbase. Liberty has taken F1 to Miami, Las Vegas, Jeddah and Doha, expanding the calendar to a record 24 races this year.

F1’s operating profit increased by 64 per to $392mn in 2023 from a year earlier, as revenues surged to $3.2bn from $2.5bn. Dorna’s revenues totalled €483mn in 2023.

Bridgepoint, which has been a Dorna shareholder for 18 years, owns about 40 per cent of the business that it bought at an enterprise value of €550mn in 2006. CPPIB bought its 39 per cent stake in Dorna from Bridgepoint in 2012.