An electric Amazon delivery van from Rivian cruises down the street with the Hollywood sign in the background.
The tech sell-off of 2022 accelerated in the past couple weeks, with first-quarter earnings reports highlighting challenges like inflation, supply chain shortages and the war in Ukraine.
For some tech leaders, the market swoon has created a double whammy. In addition to grappling with their own operating headwinds, they were among the most active investors in other companies during the extended bull market, which hit a wall late last year.
Welcome to the pain of mark-to-market accounting.
Amazon, Uber, Alphabet and Shopify each posted billion-dollar-plus losses on equity investments in the first quarter. Add in reports from Snap, Qualcomm, Microsoft and Oracle and total losses among tech companies’ equity holdings topped $17 billion for the first three months of the year.
Investments that once looked like a stroke of genius, particularly as high-growth companies lined up for blockbuster IPOs, are now producing serious red ink. The Nasdaq tumbled 9.1% in the first quarter, its worst period in two years.
The second quarter is looking even worse, with the tech-heavy index down 13% as of Thursday’s close. Many recent high fliers lost more than half their value in a matter of months.
Companies use a variety of colorful terms to describe their investment markdowns. Some call them non-operating expenses or unrealized losses, while others use phrases like revaluation and change in fair value. Whatever language they use, tech companies are being reminded for the first time in over a decade that investing in their industry peers is risky business.
The latest losses came from Uber and Shopify, which both reported first-quarter results this week.
Uber said Wednesday that of its $5.9 billion in quarterly losses, $5.6 billion came from its stakes in Southeast Asian mobility and delivery company Grab, autonomous vehicle company Aurora and Chinese ride-hailing giant Didi.
Uber originally acquired its stakes in Grab and Didi by selling its own regional businesses to those respective companies. The deals looked to be lucrative for Uber as private valuations were soaring, but shares of Didi and Grab have plunged since they were listed in the U.S. last year.
Shopify on Thursday recorded a $1.6 billion loss on its investments. Most of that comes from online lender Affirm, which also went public last year.
Shopify got its stake in Affirm through a partnership forged in July 2020. Under the agreement, Affirm became the exclusive provider of point-of-sale financing for Shop Pay, Shopify’s checkout service, and Shopify was granted warrants to buy up to 20.3 million shares in Affirm at a penny each.
Affirm is down more …….