TechFlow news — Sequoia Capital has released a statement to its limited partners (LPs) regarding its Global Growth Fund III (GGFIII) and its investment in FTX, sharing the latest developments. The statement indicates that liquidity constraints have created solvency risks for FTX. The full nature and extent of these risks are currently unclear. Based on its current understanding, Sequoia is writing down the value of its investment in FTX to $0.
Sequoia's exposure to FTX is limited. It holds investments in both FTX.com and FTX.US within its GGFIII fund. FTX is not among the top ten positions in this fund, and the $150 million cost basis represents less than 3% of the fund’s committed capital. This potential loss of $150 million is offset by $7.5 billion in realized and unrealized gains, leaving the fund in good standing. Additionally, the SCGE fund invested $63.5 million in FTX.com and FTX.US, which accounted for less than 1% of the SCGE portfolio’s fair value as of September 30, 2022. When we invested in FTX, we conducted rigorous due diligence. At the time of our investment in 2021, FTX generated approximately $1 billion in revenue and over $250 million in operating income—figures disclosed in August 2022. The situation is evolving rapidly. We will continue to provide updates as more information becomes available. Source)
