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The write-down might be fair. But the lesson I see with Reddit, Discord and Twitter is that letting a public company own even a tiny slice of your private compa
by jelling 3y ago
The write-down might be fair. But the lesson I see with Reddit, Discord and Twitter is that letting a public company own even a tiny slice of your private company is a terrible idea.
Despite only owning a point or two of multi-billion dollar companies, they implicitly get pricing power over the entire cap table.
- rubyn00bie 3y agoThis feels like a really backwards way of looking at valuations to me. I would assume Fidelity knows more about how to value a company the size of Reddit or Discord than either of those companies. Valuations are based on reality not the dreams of founders and early investors.
- minimax 3y agoFidelity is not a public company.
- ethbr0 3y agohttps://en.m.wikipedia.org/wiki/Fidelity_Investments#Ownership_and_management https://en.m.wikipedia.org/wiki/Fidelity_Investments#Ownersh... >> The founding Johnson family, individually and through various trusts, owns stock representing a 49% voting interest in FMR, and have signed agreements pledging to vote all their shares as a bloc. >> Most of the remaining 51% of the company is held by various Fidelity employees and ex-employees, including fund managers and ex-managers...
- minimax 3y agoYes, exactly. Fidelity is a private company just like Reddit and Discord are. There are still shares in the private company held by various owners, but the shares aren't traded publicly, which is what it means to be a public company.
- ethbr0 3y agoTo unify the point that GP was making, it's dangerous to let publicly transparent funds take slices of a private company, as their valuation announcements give them control. In reality, at this scale, I'm not sure if there's an alternative though. Syndicated investment is required to amass the capital levels needed.
- John23832 3y agoShare representation has nothing to do with them being public? Being "public" is determined by being tradable on public markets.
- ethbr0 3y agoBeing tradable on public markets means being listed on an exchange as a public security. https://www.investopedia.com/terms/l/listedsecurity.asp https://www.investopedia.com/terms/l/listedsecurity.asp Fidelity is not listed. This isn't an edge case: they're privately owned and not publicly traded.
- John23832 3y agoThat is the point I was making. You replied to the poster who said "Fidelity is not a public company." with a link to an excerpt about their share representation, which as nothing to do with the point.
- Dudester230602 3y ago>is a terrible idea Depends on the impact on the bank account of the decision maker.
- mupuff1234 3y agoOr maybe the lesson is that we should stop reporting valuations made up by VCs that have strong incentives to pump up their portfolios?