Fidelity, in Reversal, Raises Value of Many Tech Startups | Hacker News Reader

Fidelity, in Reversal, Raises Value of Many Tech Startups

wsj.com

44 pointsprostoalex18 comments

I feel like the ", in Reversal" is a bit of linkbait here. It's tantamount to saying "S&P 500, in Reversal, went up in March and April". All that's happening here is standard volatility around an incredibly noisy set of guesses on private company values.

Fidelity (and others) feel they have to (now have to?) publicly state what these holdings are worth. They don't get to just say "Well, the market decides" like their other holdings. Besides, even with public companies, many firms / analysts are tasked with guessing a price target.

I think the difference is they're supposed to mark-to-market to handle inflows and outflows from their accounts. Other financial firms (say Morgan Stanley or Barclays) provide price targets as a service to investors. (Whether or not they're accurate, or providing any real value with the "Service" is another story)

I assumed the title meant the traditional "fidelity" not "Fidelity Mutual".

My mind raced for meaning: Are they saying employee loyalty at specific startups makes the company more valuable / likely to succeed? Or that infidelity amongst startup employees has a large effect on the startup's success?

Reality is much less interesting. :-|

I have been looking at their mark up/downs for past few months. And I am suspicious. It seems random. It's not like they have financials sent in by the companies every month. So in an effort to fit startup investing into the mutual fund world, they have to fit square peg in round hole and put finger in mouth and stick it up in the air to guesstimate. Even the lead VCs (the guys who understand the biz) don't mark it up/down every month, much less the portfolio manager sitting 3000 miles away behind a desk in a suit and tie and doesn't know a SAN from a NAS

So...paper valuation is now negotiable not only between founders and VC's but also with later stage mutual fund investors?

WSJ is now detecting my ad blocker, which is weird; I can't view the article anyway because it needs signing in.

Anyway, see https://archive.is/2gdbf

TY. I hate all the paywall links I find on HN.

Click the 'web' button at the top of the page. It allowed me to read this article in full.

Monthly marks are pretty meaningless, especially as the companies being marked probably don't provide new information to Fidelity monthly.

That's unclear given that Fidelity is a major investor and would likely have information rights. If there are investor updates (and I assume there are), Fidelity likely gets them.

Information rights typically don't get you more than quarterly reports

When mutual funds release valuation estimates of closely held companies do they view this as an impartial exercise in determining the value or do they use these estimates to influence the decisions of their shareholders and the closely held company they are estimating the value for? It seems likely that they are using the valuation estimates as a tool within reason.

http://www.bloombergview.com/articles/2016-04-29/consultants...

>"Fidelity's 'Unicorn' Valuations Were Just Proven To Be Bogus," writes Dan Primack, and while I sympathize with his annoyance, I disagree with him a little. Primack's main point is that one shouldn't take too seriously the private-company valuations in big mutual funds' monthly holdings reports, because those valuations are not market-derived but are instead set by valuation committees that may not have much in the way of financial information. Which is fair enough. But he also tells the story of drug unicorn Stemcentrx: Fidelity invested at a $5 billion valuation in August 2015 and had marked down its holdings by 37.75 percent as of this February, but then AbbVie agreed to buy the company for $5.8 billion plus billions more in potential earnouts. "If Fidelity was so wrong about Stemcentrx," asks Primack, "why would anyone trust its carrying value of Pinterest or Zenefits?"

>But that's not quite fair. Public company acquisitions normally come at a premium. Heck, the stock market values Yahoo's core business at negative $8 billion, and it might sell for positive $8 billion, a premium of double infinity. (There may be flaws in this math.) You shouldn't think of Stemcentrx as having some true permanent value that Fidelity got "wrong" and AbbVie got "right." Instead, Fidelity's monthly marks were a rough effort to approximate a public-market price for Stemcentrx. Sometimes those prices go up, sometimes they go down, and sometimes the company is bought at a big premium to the last price. It's all an effort to recreate the appearance of public markets in private stocks. It's more bogus than public pricing, sure, but it's a sliding scale; public markets don't always reflect true permanent value either.

Matt Levine's column should be required reading for HNers.

Could someone point me to the source of the reports by Fidelity?

I've tried searching the web but can't find anything but news articles from outside sources on this and previous reports about markdowns. I'm interested in learning more about what private companies Fidelity has holding in.

Fidelity's accounting is sketchy as fuck.

Fidelity's grip on Silicon Valley perception is sketchy as fuck.

The amusing thing is that when Fidelity marks down, it's huge news and a harbinger of doom, but when Fidelity marks up, everyone finds an excuse for why it's not important.

Doom and gloom sells. Sadly.

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