Shares in the German e-commerce company Rocket Internet fell 14% after its main investor sold half its stake as the two firms have been increasingly becoming competitors. Sweden’s Kinnevik, which clashed with Rocket last year over the valuations of some of their joint investments, sold a 6.6% stake in Rocket at 19.25 euros per share, netting $220 million. Rocket Internet will not receive any proceeds from the transaction.
Berlin-headquartered Rocket Internet was founded in 2007. It has built up several businesses from fashion e-commerce to food delivery, but its shares have slid in the last year because many investors have become concerned about hight losses and falling valuations for its key start-ups. The company is facing heat from its investors due to continuous losses and a decline in revenue of its portfolio companies globally. Rocket Internet’s experience in India, for example, is far from being profitable. It made bigger bets on food-tech venture Foodpanda, fashion e-tailer Jabong and furniture portal FabFurnish. Most ventures quickly expanded in the beginning, but later started to struggle to survive. Last year, Rocket Internet sold Jabong and FabFurnish in misery sales. Last year Future Group acquired FabFurnish.com in an all-cash deal and Jabong was sold to Indian e-commerce firm Flipkart’s fashion portal Myntra for $70 million.
Kinnevik was one of the first investors in Rocket and was its biggest shareholder after the Samwer brothers who founded it and who have a 37%stake. Kinnevik also owns stakes in several Rocket’s major startups. There is a very high probability that Kinnevik will sell its remaining stake in Rocket because Kinnevik and Rocket are potential competitors for new investments. There might be conflicts of interest as Rocket moves from an initial attention on setting up new online businesses to being more of an investment firm with a model identic to Kinnevik’s. Kinnevik has not invested with Rocket in its food holdings, which now justifies the enormity of its valuation after it made a big push into the sector in 2015, a shift away from its preliminary attention on ecommerce in emerging markets.
Meanwhile, even as Rocket Internet has struggled with its bets on Indian companies, it has collected $1 billion in a new fund to support Internet companies globally. The Rocket Internet Capital Partners fund is Europe’s biggest fund concentrated on the Internet sector. The new fund will make early-stage and growth-equity investments in high-growth Internet-related businesses. It plans to invest in key attention fields of the Internet sector including marketplaces, e-commerce, financial technology, software and travel. The fund gained essential support from a diverse group of global investors, including financial organizations, pension funds, asset managers, foundations and wealthy individuals.