April 27, 2016 / 10:40 AM / 2 years ago

Investment group Kinnevik cuts value of its assets in first quarter

STOCKHOLM, April 27 (Reuters) - Sweden’s Kinnevik , a major investor in digital consumer businesses, said a big drop in the value of its biggest unlisted holding, Global Fashion Group (GFG), had contributed to a fall in its net asset value in the first quarter.

GFG, in which Rocket Internet is also a major shareholder, is a holding company which has exposure to struggling economies such as Brazil and Russia. It has just secured fresh funding, but during that process Rocket Internet cut the company’s valuation to 1 billion euros, down two-thirds in less than a year.

Technology company valuations around the world have come under pressure since the third quarter of 2015 while worries over a possible bubble in the sector have caused venture capital investments to dry up.

Kinnevik cut its valuation of the shares it holds in GFG by 1.5 billion crowns ($185 million) to 2.5 billion crowns in the first quarter from the previous quarter.

“It’s a perfect storm of everything going wrong from a valuation point of view despite everything going fine for the company. It’s a classic sentiment story,” Kinnevik CEO Lorenzo Grabau told Reuters.

Kinnevik, which is also a major shareholder in Europe’s biggest dedicated online fashion firm Zalando, said its own net asset value fell to 72.7 billion crowns ($8.97 billion) due to a fall in the value of both its listed and privately held assets.

It said a sharp decline in the supply of growth and venture capital and substantial write-downs by a number of private investors resulted in downward pressure in valuations.

Kinnevik has a 26 percent stake in GFG, which includes online fashion businesses Zalora Dafiti in Latin America and Lamoda in Russia.

Kinnevik shares were down 2.7 percent at 0846 GMT, compared with a largely flat wider Stockholm bourse. Rocket Internet shares were down 7 percent.

Grabau said Kinnevik, which is flush with cash following last year’s sale of its stake in Russian online classifieds firm Avito, would take advantage of weaker valuations with possible new investments in financial technology and healthcare.

“We are continuing to look at fintech in a very proactive manner,” Grabau said. “We believe this is the year of fintech - the market is maturing in terms of consumer adoption of new business models and the opportunities are more reasonably priced than last year.”

“If we were to make another investment in the next 6 months, it would probably be fintech,” he added.

Kinnevik recently invested $65 million worth of shares in U.S. firm Betterment which offers automated investment advice. It is returning a total of 7.1 billion crowns to shareholders in the first half of 2016.

$1 = 8.1016 Swedish crowns Reporting by Mia Shanley, additional reporting by Eric Auchard in Frankfurt; Editing by Elaine Hardcastle

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