Sequoia Capital Reduces Its Entire $214 Million Stake In FTX To Zero
Sequoia Capital, a venture capital firm, revealed in a letter to its partners on November 10 that it had written down to $0 and declared a complete loss on its $213.5 million investments in FTX and FTX US.
The letter claimed that FTX’s exposure to the exchange is “limited” in its Global Growth Fund III, where the cost basis for the FTX portion of the fund was $150 million, even though the company’s crisis has “created a solvency risk.”
Sequoia assured its investors that the fund wouldn’t suffer from the writing off of FTX, noting that it represented less than 3% of the capital committed to it.
“The $150M loss is offset by ~$7.5B in realized and unrealized gains in the same fund, so the fund remains in good shape,” the firm added.
The venture capital firm also claimed that $63.5 million from its Sequoia Capital Global Equities Fund was invested in FTX and FTX US; however, the holdings accounted for less than 1% of the total portfolio.
As part of FTX’s $900 million Series B investment round in July 2021, Sequoia made investments in the now-cash-strapped cryptocurrency exchange. At the time, this was the most significant crypto investment ever documented.
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Sequoia assured its partners that it thoroughly investigated every investment with due diligence, and FTX was no exception.
“At the time of our investment in FTX, we ran a rigorous due diligence process. In 2021, the year of our investment, FTX generated approximately $1B in revenue and more than $250M in operating income,” Sequoia said.
“We are in the business of taking a risk. Some investments will surprise to the upside, and some will surprise to the downside,” the letter explained.
Sequoia said it would inform its partners of its upcoming actions when new information becomes available.
With about $85 billion in assets currently under management, Sequoia Capital previously made early investments in tech behemoths Apple and Google and, more recently, Airbnb.