The markdowns erased USD 23 billion in value from Tiger's giant holdings of startups around the globe, one of the people familiar with the firm said. Its private portfolio includes big bets on hundreds of companies including TikTok parent ByteDance and payments company
While substantial, the markdowns -- including USD 9 billion in the second half of the year--highlight the lag in private markets compared with similar fast-growing public companies. Tech stocks fell sharply last year, yet large venture-capital investors have so far reported more modest declines,
According to the Wall Street Journal, SoftBank Group reported its USD 48 billion Vision Fund 2 saw a roughly 30 per cent drop in valuations of its private investments between April and December, compared with a more than 50 per cent drop in its publicly traded holdings.
The disconnect is partly explained by the tricky process of valuing private companies. WSJ said managers have wide discretion; they typically rely on recent transactions, fundamentals like revenue and the performance of comparable companies. They also often hold preferred stock, which gives investors protections if a company sells at a discount and often decreases in value at a slower rate than common stock.
Managers generally say they hew to consistent valuation processes, regardless of market cycles, that involve independent assessments of companies' worth, according to WSJ. Some question if public markets are a valid benchmark, contrasting the volatility of public markets with the longer-term nature of their investments in private companies.
Still, the lag in private-market valuations during a rout in technology stocks has drawn the attention of investors including Harvard University's endowment, whose chief suggested in his annual letter last fall that venture managers hadn't written down their private investments sufficiently. That could create a blind spot for investors deciding whether to invest in new funds managers are raising, WSJ said.
The recent write-downs at Tiger changed some of its performance stats significantly since it began raising a new USD 5-billion venture fund last fall, according to WSJ.
WSJ said when it initially sought investors for the fund, PIP 16, it reported that a USD 5 billion fund it raised in 2020, PIP 12, had generated a 22 per cent internal rate of return for investors--a well above-average figure--through June 30.
That figure has fallen to 9 per cent, people familiar with the matter said. Similarly, PIP 11's internal rate of return has fallen to 13 per cent from 23 per cent over the same time frame. PIP 10's decreased to 35 per cent, from 39 per cent.
Tiger subsequently shared updated performance metrics with prospective investors after taking additional losses in the third quarter, a person familiar with the matter said. Tiger regularly provides performance and portfolio data to existing and potential investors, the person said, regardless of the market backdrop, according to WSJ.
All of Tiger's largest investments have taken a hit, according to people familiar with the firm. When it began fundraising last fall, the firm told investors that its stake in payment processor Stripe was worth USD 1.6 billion as of June 2022, WSJ said. On Wednesday, Stripe said it raised USD 6.5 billion in a deal that valued it at USD 50 billion, nearly half of where it was in its last funding round two years ago.
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