Stockholm-headquartered investment firm AB Kinnevik has yet again marked down the value of its 17 per cent holding in Indian online classifieds company Quikr at $96.9 million (SEK 941 million) as on December 31, 2019.
The value of its holding stood at $175.3 million (SEK 1,703 million) a quarter ago, AB Kinnevik disclosed in its quarterly report released earlier this month.
This devaluation, in turn, has brought down Bengaluru-based Quikr’s overall market valuation to $569.9 million from $1.03 billion in the quarter ended September 2019, thus signalling that it’s no longer a unicorn, a moniker used for a privately-held startup with a valuation of $1 billion or more.
“Quikr has discovered that certain dealers and vendors within the managed rentals and cars segments have placed fictitious or misrepresented transactions on its platform. These had the dual effect of potentially overstating the value of transactions and revenue generated in these categories, while introducing risk on recoverability of receivables,” Kinnevik said in its report.
“The company [Quikr] has reduced its footprint in these segments while it strengthens internal operational controls to prevent recurrence, and also pursues criminal action against those responsible for past actions,” it added.
This isn’t the first time that Kinnevik has pared Quikr’s valuation. In its interim report for the quarter ended June 2019, Kinnevik valued its 17% stake in the company at $157 million, valuing the company at $933 million.
Online classifieds and services portal Quikr had reportedly laid off hundreds of employees late last year owing to an internal employee fraud that had impacted at least three of its verticals including real estate, Quikr Jobs, and automobile segments. The scam was orchestrated by mid-senior employees in the sales team at Quikr’s real estate product Grabhouse, Mint reported in December. Quikr had acquired Grabhouse in an all-stock deal worth $10 million in November 2016.
Speaking to analysts during earnings call on February 6, 2020, Samuel Sjostrom, head of strategy at Kinnevik said, “Our values representing in the Q4 report not only reflects these fictitious transactions but also the measures that are now being taken in relation to reducing Qukir’s footprint, moving away from operations where the fraud occurred, and also amending revenue recognition principles…Quikr being a high growth company, the change in valuation method we are doing now to derisk our valuation, also has a negative impact on the valuation.”
Responding to analyst queries on the valuation markdown, Kinnevik CEO Georgi Ganev said, “These issues were discovered last year and they were not shown in these audits…we see this being in those areas or those verticals where Quikr has moved its business model into a transactional business compared to the kind of standard classifieds business. Those verticals have now been significantly reduced…and we have taken a prudent approach to this when it comes to valuation of the company…”
“We also know that the CEO and his team have taken forceful measures and addressed what has occurred, and no one in the C-suite or the level below has been identified of being complicit in these fraudulent activities. So it’s basically people further down in organisation. So since then, Quikr has also laid off a lot of their workforce, basically, half of the workforce, in order to become profitable faster and not dependent on funding, which is, of course, something that we appreciate. So we sit now with a smaller company, but we also think it’s much healthier, and we will focus on remaining verticals and continue to grow them,” Ganev added.
Quikr services over 20 million unique monthly visitors and focuses its operations on five verticals, including good, cars & bikes, jobs, homes, and services. More than 50% of Quikr’s revenue is generated from commissions on transactions rather than listing fees from classifieds, Kinnevik said.
Since inception in 2008, Quikr has acquired about 15 companies.