Fidelity cuts its valuation in Meesho to $3.5 billion

Fidelity Investments has recently devalued its investment in the Indian social commerce startup Meesho by 33.6%, resulting in a revised valuation of $3.25 billion. However, Meesho contends that when adjusted for outstanding shares, its true valuation stands at $3.5 billion. This adjustment comes as Fidelity lowered the value of its Meesho holding to $27.8 million at the end of December, down from the initial $41.9 million invested in the second half of 2022 through a specific mutual fund unit.

Fidelity Investments cuts its valuation in Meesho by 33.6%

The downward adjustment in Meesho’s valuation is not a standalone event; Fidelity had already marked down the startup’s valuation to $4.1 billion at the end of October. This decline follows a secondary sale transaction late last year when early investor Venture Highway sold some of its Meesho equity to WestBridge Capital. This transaction valued Meesho at $3.5 billion, a factor potentially influencing Fidelity’s reassessment. Meesho responded to Fidelity’s valuation adjustment through a spokesperson, explaining, “Funds attribute value to their portfolio investments, considering various factors such as the valuation of comparable companies.”

According to Meesho, the valuation of $3.5 billion is derived from Fidelity’s filings, the number of shares held, and the current total outstanding fully diluted shares. The spokesperson also noted that the increase in outstanding shares, notably due to the expansion of the Employee Stock Ownership Plan (ESOP) pool, could have contributed to the shift in valuation. In tandem with the Meesho adjustment, Fidelity has made slight upward revisions to the values of its holdings in Reddit, Gupshup, and X, as disclosed in its monthly report.

Meesho’s strategic resilience and expansion plans

Despite these adjustments, all these startups remain below their original investment values. Meesho, with backing from Meta, Peak XV, Prosus Ventures, B Capital, and SoftBank, continues to be recognized as one of India’s fastest-growing e-commerce startups. AllianceBernstein reported that Meesho’s current Gross Merchandise Value (GMV) run rate exceeds $5 billion. A significant aspect of Meesho’s success lies in its strategic focus on small towns, with over 50% of its sales originating from these areas.

This unique approach allows Meesho to effectively target a demographic largely overlooked by major players like Flipkart and Amazon. AllianceBernstein underscores the importance of Meesho’s prioritization of small towns and its concentration on a mass-market, value-conscious customer base as key contributors to its success. Looking ahead, Meesho is not resting on its laurels. The company is planning to diversify its offerings and tap into new areas, including the development of a financial services platform and the expansion of its grocery delivery business, as reported by the Indian Daily Economic Times.

These strategic moves align with Meesho’s commitment to adapt to evolving market dynamics and explore new avenues within the competitive Indian e-commerce landscape. Despite the periodic adjustments in valuation, Meesho’s growth trajectory and strategic initiatives showcase its resilience and potential in the dynamic startup ecosystem. Fidelity’s valuation adjustments, influenced by market dynamics and specific transactions, provide valuable insights into the ever-evolving landscape of startup investments and the challenges faced by both investors and emerging companies.