As it prepares to go public, Bird says business is rebounding. But a big mutual fund marked down shares by half.

This post was originally published on this site
  • Ahead its public debut, Bird says business is on the rebound from a disastrous 2020.
  • But Fidelity, a key investor, did not appear convinced, slashing the value of its shares.
  • Fidelity disclosed that its Bird stake was worth half of what it was late last year.
  • See more stories on Insider’s business page.

In its pitch to prospective investors ahead of its debut as a public company, Bird Rides said it was on the rebound from a troubled 2020, when the pandemic ground electric-scooter ridership to a halt.

But at least one key existing investor does not appear convinced. Fidelity Investments marked down Bird shares in its Magellan Fund by 21% from February to May, according to disclosures the mutual-fund giant filed, which were reviewed by Insider. 

This is on top of previous markdowns. All told, Fidelity has halved the value of its Bird stake from $10.60 a share in November to $5.24 a share in May, according to its disclosures.

Bird announced on May 12 it would go public through a merger with Switchback II, a special-purpose acquisition company founded by the energy-industry execs Scott McNeill and Jim Mutrie. The merger is expected to close by the end of this quarter.

Both Bird and Fidelity declined to comment, so the reason for the markdown is not clear.

One possibility is that Fidelity was reflecting the $2.3 billion enterprise value of the SPAC deal, which is below the $2.85 billion valuation it reached in January 2020, a 19% haircut.

But this Fidelity fund slashed the value of its Bird holdings by nearly 60% over roughly the same time period, since February, 2020. 

Mutual fund markdowns should always be taken with a grain of salt because it can be difficult to value illiquid assets. For instance, Fidelity generated headlines when it marked down its Snapchat stake by 25% in 2015. Two years later, Snap went public and since then its stock has soared upwards of 140%.

It’s also worth noting that Fidelity has enough confidence in Bird to have recently acquired more shares.

Fidelity is an anchor in Switchback II’s $160 million private investment in public equity (PIPE) financing, which is when an institutional investor buys shares in a SPAC deal below market prices. PIPE deals increase the funds available for the SPAC to buy the target company.

Still, mutual fund markdowns are significant because they are one of the few ways to gauge how investors value private companies. Under longstanding SEC rules, mutual funds are required to account for their holdings at fair market value, meaning the price they believe those shares would command at that given moment. 

And Fidelity may not be the only one that soured on Bird before its SPAC announcement. The company had the fourth-worst sentiment among 75 pre-IPO startups at the end of April tracked by Zanbato, which facilitates private stock sales. While most companies Zanbato tracks were marked up an average of 14.6%, Bird was marked down 36.8%, Zanbato reported.

Insider reported in December that Fidelity was attempting to offload 658,976 shares of Bird at a loss, which represented 12% of its position. The effort ended up being unsuccessful – or the fund manager had a change of heart – because Fidelity retained all its shares.

Founded by former Uber executive Travis VanderZanden in 2017, Bird became the fastest company in history to reach unicorn status in 2018. Last year it was forced to abruptly lay off hundreds and scale back its ambitions as ridership plunged during the pandemic.

Bird says its topline revenue increased 81% in March compared to February, which likely reflects in part a seasonal increase. Bird reported $180 million in losses on $95 million in revenue in 2020 but says it expects to double revenue annually for the next three years and achieve profitability in 2023. 

Related Posts