(Bloomberg) — Sequoia Capital wrote down the total worth of its holdings in FTX, a sign the enterprise capital agency sees no clear path to recouping its funding within the embattled cryptocurrency trade.
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The VC agency put in about $214 million final 12 months in FTX’s worldwide and US companies, Sequoia informed its buyers Wednesday. The writedown consists of holdings of each FTX.com and FTX.us, mentioned a spokeswoman for the agency.
“We’re within the enterprise of taking threat,” Sequoia wrote in a message to buyers. “Some investments will shock to the upside, and a few will shock to the draw back.”
Sequoia is amongst a number of distinguished backers that stand to lose large on their holdings of Sam Bankman-Fried’s FTX. Others embrace BlackRock Inc., Tiger World Administration and SoftBank Group Corp. That’s a giant reversal of fortune for the startup funding powerhouse, which in September known as Bankman-Fried a “legend” and held up his “savior advanced” as price emulating. This week, Sequoia appended a line to that public article that clashed with its celebratory tone.
“Since this text was revealed, a liquidity crunch has created solvency threat for FTX and its future is unsure,” the most recent addition went. “FTX is exploring all alternatives to make sure its prospects are capable of get better their funds as shortly as attainable.”
A smaller enterprise fund, Multicoin Capital, informed buyers Wednesday that about 10% of its belongings beneath administration had been affected. “Sadly, we weren’t capable of withdraw all the Fund’s belongings on FTX,” Multicoin wrote in a letter reviewed by Bloomberg.
A sudden lack of confidence in FTX.com amongst prospects uncovered deep issues with the cryptocurrency trade. Folks rushed to withdraw cash and dump tokens related to the corporate, inflicting a liquidity crunch. A rival, Binance, agreed to purchase FTX.com after which pulled out over considerations with FTX’s monetary well being.
Bankman-Fried held a name with buyers Wednesday and mentioned FTX.com wanted a money infusion or must file for chapter, Bloomberg reported. The US entity, FTX.us, stood at a distance from the disaster, however the Sequoia writedown signifies a insecurity in that asset, too.
Sequoia sought to reassure buyers, saying FTX accounts for lower than 3% of dedicated capital within the fund with the largest publicity to FTX. That fund, Sequoia mentioned, has realized and unrealized beneficial properties of about $7.5 billion.
Right here’s the total memo:
–With help from Hannah Miller.
(Updates with Sequoia’s earlier feedback from the fourth paragraph)
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