Once recognised as the largest internet technology giant, Rocket Internet is standing on crumbling ground at the moment. It has been plagued with several consecutive troubles over the last few months. Now, adding to its nightmares, Swedish investment firm Kinnevik has decided to sell at least half of its 13 percent stake in the German internet giant.
Through an official release, Rocket Internet’s largest investor Kinnevik has announced its decision to sell nearly 10.9 million shares by way of an accelerated book-building process. It has placed the said number of shares to institutional investors for a price of 19.25 euro per share (approx $20.30 per share). The gross proceeds from this transaction are expected to be around 209.8 million euros, but it’ll not receive the said amount.
This development definitely comes as a massive punch to the gut for Rocket Internet as it is now losing support from one of its major backers. This further indicates that interest in the company which was once thought to be the hub of promising technology startups is faltering.
The stock prices of Rocket Internet, which trades under the ticker symbol RKET, seems to have been massively affected by this stake sale. Post the announcement, the company’s shares tanked by a whopping 11 percent and settled around 19.60 euro, which is close to the placement price set forth by Kinnevik.
Thus, this share placement process involves about half the total share capital held by Kinnevik, and it is still retaining 6.6 percent of the total. Rest of the shares are currently under a lock-up period but the investment firm has reserved the right to increase this amount if needed. Talking about the same, the press release states,
In connection with the Transaction, Kinnevik has committed to a lock-up period of 90 days in respect of its remaining shareholding in the Company, subject to customary exceptions and waiver by the Sole Bookrunner.
Kinnevik’s partial exit also comes on the heels of a series of disagreements between them and Sawmer brothers, founders of Rocket Internet. It revolves about how the internet giant has only been witnessing an increase in losses and has failed to emulate the success of Amazon in United States or Alibaba in China. This disappoints the investment company as it also holds stakes in the consortium of companies founded by Rocket Internet.
Also, this move potentially follows the decision of two Kinnevik representatives to step down from the Rocket supervisory board. This was done to prevent conflicts of interests as Kinnevik believed that Rocket Internet was straying from their goal of being an incubator for startups to a general investment firm.
Rocket Internet was founded by a trio of brothers, namely Oliver, Alexander and Marc Samwer in 2007. The company prides itself for scouting successful startups and building them into scalable businesses. It usually takes any proven business model and replicates the same to form a consortium of companies in Europe, Asia, Africa and Latin America.
Till date, it has built a dozen of startups across a multitude of categories ranging from fashion e-commerce to food delivery. But, their business model seems to be failing as they’re now selling parts of their business to local players. This has been the case for Jabong in India (sold to Flipkart-owned Myntra) and Food Panda in Europe (sold to Delivery Hero).