
Fidelity, in Reversal, Raises Value of Many Tech Startups - prostoalex
http://www.wsj.com/articles/fidelity-in-reversal-raises-value-of-many-tech-startups-1462041176
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boulos
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.

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mathattack
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)

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IamFermat
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

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

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ikeboy
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](https://archive.is/2gdbf)

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

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

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

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boulos
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.

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

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meursault334
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.

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ikeboy
[http://www.bloombergview.com/articles/2016-04-29/consultants...](http://www.bloombergview.com/articles/2016-04-29/consultants-
bankers-and-teens)

>"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.

See also [http://www.bloombergview.com/articles/2016-03-04/unicorns-
ar...](http://www.bloombergview.com/articles/2016-03-04/unicorns-aren-t-so-
beloved-by-investors-anymore)

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

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burger_moon
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.

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cloudjacker
Fidelity's accounting is sketchy as fuck.

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

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ageek123
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.

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abritinthebay
Doom and gloom sells. Sadly.

