Fidelity, a U.S. asset manager, has reduced the value of its stake in Meesho, an Indian social commerce startup, by 33.6%. This markdown gives Meesho a valuation of $3.5 billion, adjusted for outstanding shares.
Key Takeaway
Fidelity has reduced the value of its stake in Meesho by 33.6%, resulting in a valuation of $3.5 billion for the Indian social commerce startup. The valuation adjustment follows a secondary sale transaction late last year, and Meesho attributes the shift to the increase in the number of outstanding shares, particularly due to the ESOP pool expansion.
Valuation Adjustment
Fidelity’s valuation of Meesho decreased to $27.8 million at the end of December from the original investment of $41.9 million made in the second half of 2022 through a specific mutual fund unit. This markdown was disclosed in Fidelity’s monthly report on Monday.
Factors Contributing to the Valuation Shift
The valuation adjustment follows a secondary sale transaction late last year, where early backer Venture Highway sold some of its equity in Meesho to WestBridge Capital. This sale valued Meesho at $3.5 billion, which may have influenced Fidelity’s assessment.
Meesho’s Response
In response to the valuation change, a Meesho spokesperson stated that the increase in the number of outstanding shares, particularly due to the ESOP pool expansion, could have contributed to the valuation shift. Fidelity has also slightly increased the value of its holding in Reddit, Gupshup, and X, according to the monthly disclosure. However, all of these startups remain below their original investment dollars.
Meesho’s Operations and Growth
Meesho, backed by Meta, Peak XV, Prosus Ventures, B Capital, and SoftBank, operates as a social commerce startup and is one of the fastest-growing e-commerce startups in India. Its current GMV run rate is over $5 billion, and it is looking to expand into new areas, such as building a financial services platform and scaling its grocery delivery business, according to the Indian daily Economic Times. Over 50% of Meesho’s sales come from Tier 2 and below cities, allowing it to effectively target a demographic largely overlooked by Flipkart and Amazon so far. Meesho’s strategic prioritization of small towns and focus on a mass-market, value-conscious customer base is paying dividends, as reported by AllianceBernstein.
