Eight Roads, which is backed by Fidelity Investments’ billionaire Johnson family, has shelved its plan to divest stakes in about 40 China-based technology companies, according to sources familiar with the matter.
The attempt recently came to a halt primarily due to the decision to hold on to the asset for longer amid the improving overall market environment in China, the sources said.
Asian secondary specialist TR Capital had emerged as the lead buyer for the portfolio, which was said to be close to signing an agreement in December, they added.
Per DealStreetAsia’s previous report, the total transaction could be valued at approximately $80 million.
After completing a demerger in 2019 and saying that it has no plan to raise third-party capital and will continue operations with the financial backing of the Fidelity network, the venture firm was looking to offload its stakes in these companies since early last year, DealStreetAsia reported.
The move was mainly triggered by US restrictions on investments in China’s advanced technology sector, the report said. The entire offer was worth about $1 billion when the process first launched around last year, but the valuation was later negotiated significantly lower, the sources said.
TR Capital and Eight Roads did not immediately respond to DealStreetAsia’s request for comment outside of office hours in Asia.
Investor interest in secondary opportunities has been growing as macro market challenges and a recovering global IPO market continue to weigh on fund distributions in China as well as globally. Sustained US-China geopolitical uncertainties in the past years are also driving LPs—the likes of university endowments and pension funds—to seek innovative and near-term liquidity solutions.
Chinese VC and growth investments are trading at discounts of 60% or more, representing a significant discount and could be seen as an attractive entry point, according to industry experts.
TR Capital and Eight Roads previously closed a deal last year when the secondary investor acquired stakes in three Indian portfolio companies of the former, including MoEngage, Shadowfax, and Whatfix for over $50 million.
Eight Roads website states that it has invested over $1.1 billion and has a portfolio of over 130 companies in China, including Alibaba Group.
Founded in 2007, TR Capital is one of the oldest secondaries investors in Asia. The firm has closed five flagship funds, managed total capital commitments of close to $1.5 billion, per its website.
