Fidelity Writes Down Value of Snapchat Holding by 25%

Snapchat's Value Cut by 25% in Fidelity Write Down
  • Snapchat raised $1.2 billion to date at $16 billion valuation
  • Dropbox investment also slipped in value earlier this year

Snapchat Inc.’s valuation was cut by a quarter by one of its biggest backers, the latest evidence that private technology companies are losing some of their luster.

Fidelity, a fund manager which invested in the creator of the mobile app for sending disappearing photos and videos, marked down its stake in Snapchat by 25 percent to $34.5 million in the third quarter, according to data from Morningstar on Tuesday. Snapchat had raised cash from investors at a $16 billion valuation earlier this year, a person familiar with the matter said in May, bringing its total fundraising to $1.2 billion. The Financial Times earlier reported Fidelity’s writedown.

Fidelity is reassessing its stake in Snapchat amid increasing anxiety in Silicon Valley that some privately funded companies may not live up to their lofty valuations. Other startups, including Dropbox Inc., have had their values adjusted downward by mutual funds in recent months. Last week, Square Inc. said it was seeking a market capitalization for its initial public offering that was significantly lower than its private-company valuation.

Mary Ritti, a spokeswoman for Los Angeles-based Snapchat, declined to comment. A representative for Fidelity also declined to comment.

The Fidelity Growth Company Fund and the Fidelity Series Growth Company Fund bought convertible preferred stock in Snapchat in March. They had both been carrying it at cost as of Aug. 31, according to the filings, suggesting the markdown happened in September. That comes after Fidelity marked down the value of its investment in Dropbox by about 15 percent earlier this year.

Snapchat raised its last round of funding as it worked on an advertising and media business model. The company makes money through sponsored content in its application, including ads in Discover, its set of channels run by media organizations such as People magazine and ESPN.

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