meesho valuation cut: Fidelity Investments cuts Meesho’s valuation by 10% to $4.4 billion

Another day, another writedown. Funds managed by US-based multinational financial services firm Fidelity Investments have cut the valuation of social commerce platform Meesho in their books to $4.4 billion as of March 31, according to regulatory filings with the US Securities and Exchange Commission (SEC). This is a reduction of about 10% from the $4.9 billion valuation at which Fidelity had invested in Meesho in September 2021.

Notably, Fidelity’s funds had valued Meesho at $4.98 billion as of December 2022. Prior to that, as of September 2022, the investor had ascribed a valuation of $4.29 billion to Meesho. Crossover funds, which invest both in publicly traded and privately held companies, periodically review the valuations of their portfolio companies.

Meesho in a statement said that the markdown was largely affected by an employee stock option plan (ESOP) pool applicable to the period.

“Funds attribute value to their portfolio investments, taking into account multiple factors. In this case, factors like an increase in the ESOP pool of nearly 4 percent in the applicable period have influenced the attribution of value,” said a Meesho spokesperson.

The valuation markdown for Meesho, which was notified to the US SEC on May 25, has come at a time when the Bengaluru-based startup is looking at reducing its cash burn, after already having trimmed it significantly to around $5 million currently from approximately $40 million a month in early 2022. ET had reported this development exclusively on April 3.

Fidelity had co-led Meesho’s last funding round with Eduardo Saverin’s B Capital in September 2021, when the social commerce startup raised $570 million at a valuation of $4.9 billion. The funding round had resulted in Meesho’s valuation doubling in less than six months. It had also attracted investments from SoftBank Vision Fund, Facebook and Prosus Ventures.

Vidit Aatrey, the company’s cofounder and chief executive, had told ET that Meesho would continue to spend less on marketing, and that the etailer was ready to settle for a lower rate of growth. “We have been reducing cash burn and we still have been growing. Last (calendar) year we grew 100% and I think this year as well we will grow close to 50% (revenue). And this is a time when we are investing less and less in marketing,” he had said.

Fidelity’s markdown of Meesho’s valuation was first reported by Moneycontrol.

Meesho’s valuation markdown also comes close on the heels of US-based crossover funds slashing the valuations of several Indian consumer internet companies, amid a slump in the investment ecosystem for startups and new-economy companies across the world.

The valuations of Swiggy, Byju’s, Pine Labs, PharmEasy and Ola have recently been reduced by investors such as Invesco, BlackRock, Fidelity, Vanguard, Baron Capital, Neuberger Berman and Janus Henderson.

Also read | Exclusive: Pine Labs, PharmEasy face markdowns by Neuberger Berman as tech valuations tumble

On Monday, ET reported that the Private Shares Fund, a New York-headquartered firm focusing on investments in late-stage venture-backed private companies, has reduced the valuation of its holding in edtech unicorn Eruditus by about 8.6%. The markdown translated to a valuation of about $2.9 billion as of March 31, 2023, a drop from $3.2 billion in August 2021, which was the valuation at which the Mumbai-based startup had last raised equity-based capital from investors.

Stay on top of technology and startup news that matters. Subscribe to our daily newsletter for the latest and must-read tech news, delivered straight to your inbox.