In quarterly filing, Fidelity takes the axe to value of Dropbox, MongoDB and others.
On Wednesday we wrote about how Fidelity Investments recently marked down its holdings in popular, privately-held startups like Snapchat, Zenefits and Blue Bottle Coffee. All of those shares were held in a mutual fund called the Fidelity Blue Chip Growth Fund, which primarily backs large companies in the S&P 500 and Dow Jones Industrial Average.
But Fidelity also holds startup stock in other mutual funds, including a $142.5 billion vehicle called the Fidelity Growth Company Fund. And again we see some significant markdowns.
Before continuing, it’s important to understand how Fidelity generally invests in privately-held companies. Rather than having each mutual fund do its own deals, the firm’s global equity capital markets group — led by Andy Boyd — negotiates an investment with the company, and then asks individual Fidelity portfolio managers if they want an allocation.
Moreover, while Fidelity marks each of its securities to market every single day (including for unlisted companies), the firm does not leave that work to portfolio managers (who might have conflicts of interest). Instead, Fidelity has created a Fair Value Committee that determines the appropriate price for each security. That means that every Fidelity mutual fund that holds Uber’s Series D stock — there are lots of them — is valuing those securities at the exact same price. It also is worth noting that no Fidelity mutual fund is allowed to invest more than 10% of their net assets in illiquid securities like startup stock, and are required to take “appropriate steps to protect liquidity” if value appreciation or depreciation threatens to test that threshold.
Okay, back to the Fidelity Growth Company Fund. We’ve tracked 24 privately-held companies of interest in there, including several that also were in the Blue Chip Growth Fund (e.g., AppNexus, Snapchat, Uber, Zenefits). But there also were several notable companies that weren’t in the last grouping, including Dropbox, MongoDB, Moderna, Intarcia Therapeutics and Turn Inc.
For example, a pair of biotech “unicorns” — Moderna and Intarcia Therapeutics — each had static valuations between the end of May and the end of September, but each had experienced significant mark-ups over original cost.
NoSQL database company MongoDB, on the other hand, was down 11.77% since the end of May, and a whopping 54% from the time of Fidelity’s original investment in October 2013. Also taking a big valuation hit was Turn Inc., a platform for managing data-driven digital advertising. It got marked down 25.7% between the end of May and the end of September, and 46% from the time of Fidelity’s December 2013 investment. And then there is Dropbox, which was marked down 19.5% between the end of May and the end of September, but was still carried nearly 46% higher than when Fidelity first bought the shares in May 2012.
Fidelity declined to comment on its valuations, or on any of its particular holdings. You can view all of the Fidelity Growth Company Fund below: