(Bloomberg) -- Fidelity Investments' Contrafund, an early investor in WeWork, slashed its valuation of the office-sharing company before Wall Street threw cold water on it.
In March, Fidelity reduced the value of the Contrafund's WeWork stake by more than a third, according to regulatory filings. That suggested a total market value of about $18.3 billion, compared with $27.9 billion under Fidelity's previous estimate. Both are based on 338.4 million shares outstanding on a fully diluted basis at the end of last year.
Goldman Sachs Group Inc. pitched WeWork as a $65 billion business earlier this year. But persistent losses at the company and questions about its prospects have dragged that down. WeWork is now considering seeking an IPO valuation of about $20 billion to $30 billion, Bloomberg reported last week.
Read more about WeWork's contentious IPO
Fidelity's reduction represented a quick reversal by the mutual fund giant, which had raised its valuation of WeWork some 48% during last year's third quarter. The $117.5 billion Contrafund, run by William Danoff, cut the value of its stake in the company to $341.6 million at the end of March, according to data compiled by Bloomberg and regulatory filings.
Danoff's funds, including the Contrafund and the Fidelity Series Opportunistic Insights Fund, initially bought common and preferred stock in WeWork during June 2015 at a price of about $33 a share, and then added to their holdings in December 2016 at roughly $50 a share. That valuation remained little changed until last year's third quarter, when the Fidelity funds suddenly raised their estimate to about $80 a share.
Read more: WeWork's IPO Is in Flux and Bondholders Are Getting Nervous
The firm's estimate reached about $82 a share by the end of February. But in March, Fidelity sold roughly 553,000 WeWork Class A common shares, regulatory filings show. Because the sale price was below the figure in Fidelity Contrafund's books, accounting rules required the fund to reconsider its WeWork valuation.
Charles Keller, a spokesman for Boston-based Fidelity, declined to comment. Business Insider earlier reported Fidelity's move without providing the overall valuation.
--With assistance from Ellen Huet and Denise Cochran.
To contact the reporter on this story: Miles Weiss in Washington at mweiss@bloomberg.net
To contact the editors responsible for this story: Alan Mirabella at amirabella@bloomberg.net, Vincent Bielski, Josh Friedman
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