Chinese unicorns facing reduced valuations as investors trying early exit

In the midst of coronavirus outbreak that made the markets around the world more volatile, Chinese unicorns have also been seeing their valuations dropped from that in their most recent fundraising rounds, as showing the offerings by investors in secondary market.

Prospective acquirers desirous of purchasing privately held firms remained more active in their approach to buy stakes in billion-dollar startup firms since February when China first started reporting increasing numbers of COVID-19 cases, reported Reuters, citing two investors who tried to buy such stakes.

Sense Time, a face recognition technology development firm with Japan’s SoftBank Group Corp at back of it, was valued at $6.84 billion in a June 2019 funding round whereas DJI, which is currently the market leader in making commercial drones, was valued at $14.5 billion in an April 2018 funding round. But both of these unicorn firms are facing a drop of about 10% in their current valuations by secondary market investors, said the sources.

Ant Financial-backed bike sharing firm HelloBike and Tencent Holding Ltd backed VIPKID, an online education provider, have also been valued at reduced levels.

HelloBike’s valuation of $3.2 billion is representing a discount of about 20% whereas VIPKIDS’s current valuation of $3.95 billion is 15% lower from its previous valuation.

The shift for China’s once cherish private market comes as investors are seeing the common ways initial public offerings (IPO) and takeovers for realization of profit from early investment more difficult to achieve in current economic situation that is hardly hit by coronavirus, or will take longer time to execute those common ways.

The coronavirus pandemic badly impacted the economic activity in the markets around the world, which prompted corporate and financial investors to exit their investments earlier to face the liquidity issues ahead.

Currently there is no way for some investors to exit stock market immediately, which left no other choice for them but to sell shares in secondary markets to cover their cash requirements.