MONTREAL — Power Corp. of Canada on Wednesday said the fair value of some of its fintech investments, including Wealthsimple and two of its Portage Ventures funds, declined as public-market investors offload technology stocks. The Montreal-based financial-services conglomerate disclosed the writedowns in its earnings report for the quarter ended March 31. Here’s what you need to know:
The highlights:
- Wealthsimple: Investments in the Toronto-based fintech across all Power-affiliated entities declined by $400 million to $1.7 billion, a 19 per cent drop.
- Fund I: It fell 22 per cent, according to Power—excluding Wealthsimple, which accounts for the majority of the fund’s value.
- Fund II: Power wrote down Fund II’s investments by just one per cent, from $874 million to $864 million.
- Fund III: This fund, which is making new investments, increased its portfolio value by $28 million, or 20.4 per cent, according to Power.
Besides Wealthsimple, Portage has holdings in some of Canada’s most high-profile fintechs, including Koho, Clearco and Borrowell. Portage declined to comment. A spokesperson for Wealthsimple didn’t provide comment before The Logic’s deadline.
The backdrop: Power’s assessment came at the end of a punishing quarter for tech stocks—especially fintechs, which posted even steeper declines on average. That drop has continued into the second quarter, raising the prospect of further writedowns to come. The ARK Fintech Innovation ETF is down nearly 60 per cent this year, compared with roughly 18 per cent for the S&P 500 and 28 per cent for the tech-heavy Nasdaq index.
Paper losses: The writedowns highlight the tradeoffs for startups and funds that take investments from public companies, which sometimes have to disclose their estimate of the investments’ value. Last week, Power subsidiary IGM Financial cut the value of its stake in Wealthsimple by 20 per cent. Some say those estimates don’t accurately reflect the company’s worth. “The only real value can be determined when a stock trades,” said Christian Lassonde, an investor whose firm, Impression Ventures, has co-invested in startups such as Wealthsimple along with Portage.
Dry powder: Portage has continued to raise money for its third fintech fund throughout this year, raising US$616 million as of March for its largest fund yet. The capital comes from a number of institutional investors, including National Bank and Equitable Bank, which have been deepening their ties with the country’s fintech sector, The Logic reported this week.