Fidelity continues markdowns, cuts fair value of Gupshup and Pine Labs

According to its SEC filing, Fintech major Pine Labs has become the most recent Indian unicorn to see a valuation markdown, as its investor Fidelity Investments has cut off its valuation by about 9.2% to $4.5 Bn.

Fidelity Investments took part in several rounds of funding of Pine Labs. For the first time, it joined the startup’s funding round. In July 2021, when Pine Labs collected $600 Mn.

Moreover, the fintech unicorn’s last funding round of $50 Mn took place at a valuation of a little over $5 Bn.

The recent development comes a month post Neuberger Berman slashed Pine Labs’ valuation by 38 per cent.

Commenting on the latest valuation cut, Pine Labs CEO Amrish Rau said in a tweet, “As I had no clue about how funds do this, I decided to learn a bit more… Most investors need to value investments on a quarter/Semi annual/annual basis. Some Public market & Mutual Funds need to publicly disclose it and some like a VC need not. Each of them follow a valuation methodology based on the fund philosophy and they may differ from each other.”

Discussing that the valuation methodology may vary from investor to investor, Rau said, “In summary, it’s difficult to know the true value of the business till there is a new Term sheet on the table.”

In March, after knocking Gupshup out of the unicorn club by effectively valuing it at $957 million, Fidelity has snipped the fair value of its stake in the company by another 8 percent, now valuing it at $882 million as of May 31. The AMC has also snipped the value of fintech unicorn Pine Labs by around 9 percent, valuing it at about $4.5 billion, its filings with the US Securities and Exchange Commission (SEC) showed.

Last time, Pine Labs was valued at $5 billion, while Gupshup last raised funds at about $1.4 billion valuation.

Retaliating to Fidelity’s markdown, Amrish Rau, co-founder and CEO of Pine Labs, in a tweet, said, “Some investors evaluate the business closely every quarter and revisit the assumptions (if required) to their initial model at the time of investment, (while) some simply hold it at the cost of acquisition.”

“Some value it as per the latest fundraise (and) there are some investors who don’t care about the short-term, tend to be very conservative in their valuation calculation. In summary, it’s difficult to know the true value of the business till there is a new term sheet on the table,” he added.

The valuation cut is revealed at a time when the present funding winter and adverse macroeconomic conditions have hit Indian startups hard. Previously, Pine Labs planned to go public in 2022 but has been deferring the IPO plans due to the market headwinds.

In FY22, Pine Labs’ net loss rose 4.5% year-on-year (YoY) to INR 259.1 Cr, while operating revenue jumped 1.4X to INR 1,017 Cr.

Other than Pine Labs, Fidelity Investments also snipped the valuation of Gupshup. Moreover, there was no change in valuation of social commerce unicorn Meesho in May 2023. In June, the investment firm snapped the valuation of the startup by 9.7% to $4.4 Bn.

The Bengaluru-based social commerce unicorn had raised $570 Mn led by Fidelity Management and B Capital Group in April 2021.

Meesho was founded in  2015 by Vidit Aatrey and Sanjeev Barnwal, and it has so far raised about $1 Bn. It counts marquee names like Peak XV Partners (earlier Sequoia Capital), SoftBank, Prosus, and Meta among its investors.

Fidelity, alongside many of US-based AMCs such as Invesco, Baron Capital, and Private Shares Fund among others, has been marking down the fair values of Indian startups since the second half of December last year amid disrupting macroeconomic environment, which caused slower growth for startups.

Slower growth, coupled with an extended funding winter, also pushed startups to prioritise profitability over growth as companies looked to extend runways by saving costs.