Kinnevik Exit

Rocket Internet Loses Biggest Investor

Rocket Internet Reuters
This isn't going to help Rocket's share price. Source: Reuters

Kinnevik has finally lost patience. The Stockholm-based investment firm on Wednesday evening announced it was pulling a big chunk of its stake in Berlin-based startup incubator Rocket Internet.

It’s a massive blow to a company that has long been one of the biggest hopes for Germany’s capital, which has sought to sell itself as a hub for promising technology startups along the likes of Silicon Valley in the United States.

Shares in Rocket Internet, which went public to much fanfare back in 2014 but has long failed to earn a profit, plunged by more than 10 percent to €19.59 in post-day trading on Frankfurt’s stock exchange Wednesday night. On Thursday it plunged 14 percent to €18.35 over the course of the day.

Kinnevik was Rocket Internet’s largest investor outside of its founders Oliver, Marc and Alexander Samwer, owning a 13-percent stake in the company, which is best known for launching Europe’s largest online fashion retailer Zalando.

The partial exit comes after a spate of disagreements between the Swedish investor and the founding Samwer brothers.

The Swedish investor will no doubt lose money by selling now, rather than a couple years ago. Rocket Internet first went public back in the fall of 2014 at a price of €42.50. Depending on the situation, Kinnevik said it was prepared to sell more than half of its 22 million shares.

Still, overall it’s been a boon for Kinnevik. The Swedish firm has earned an annual yield of about 90 percent since first investing in the company in 2009 – just two years after Rocket was founded. The partial exit announced Wednesday night is bringing in 2 billion Swedich krona (€221.2 million). Back in December 2009 it invested just 35 million krona, plus a second investment that was never actually announced, but which analysts believe wasn’t any more than in the double-digit millions. Kinnevik now has to wait 90 days before it can sell its remaining 6.6-percent stake – whether it will take advantage of that option remains unclear.

The partial exit comes after a spate of disagreements between the Swedish investor and the founding Samwer brothers over just how highly to value some of the promising new startups that Rocket Internet has developed and hopes to bring to market. Kinnevik had wanted to value startups including Zalando, Hello Fresh and Home 24 at a lower price.

Perhaps foreshadowing this week’s announcement, Kinnevik last year gave up its right to two spots on the company’s non-executive supervisory board, which has a say in strategic decisions and can hire and fire executives in German companies.

Rocket Internet, founded in 2007 by the Samwer brothers, have founded dozens of startups, often basing their ideas on models pioneered in other countries like Amazon in the United States or Alibaba in China and creating European alternatives.

While some have found success in Germany, many of them have failed to earn a consistent profit, something which has increasingly worried investors and forced the company to delay some of its IPOs. CEO Oliver Samwer has pleaded for patience, but the skepticism is only likely to grow with Wednesday’s announcement by Kinnevik.

 

Helmut Steuer is Handelsblatt’s correspondent for Scandinavia. To contact the author: steuer@handelsblatt.com

This article was updated at 4 p.m. CET on Thursday with Rocket’s share price developments and the results of the sale.