With all this great news coming out around Amazon, you’d think the company didn’t get a thing wrong for the last 12 months. The stock is up six percent this morning and analysts are crowing about the online mega-retailer’s accomplishments.
Of course, buried in the details of Amazon’s annual report is one nugget of bad news. The company is getting creamed on its investment in LivingSocial.
Amazon reports a stake in LivingSocial of 29%, according to its annual filing. Breaking down its investment’s results, Amazon stated, between absorbing a $579 million impairment charge and operating expenses of $862 million that dwarfed the company’s $536 million in revenues, LivingSocial recorded a staggering operating loss of $905 million in 2012, generating a net loss of $650 million.
According to one report, LivingSocial CEO Tim O’Shaughnessy told employees “we had to revalue some of the companies we acquired last year” as he tried to explain away a sizeable third quarter impairment charge last year.
“As of December 31, 2012, the book value of our LivingSocial investment was $52 million,” Amazon’s filing stated.
That translates to a sizeable loss. LivingSocial raised over $800 million across a dozen rounds from VCs and funds including Steve and Jean Case, Revolution LLC, Case Foundation Ventures, Lightspeed Venture Partners, Institutional Venture Partners, U.S. Venture Partners X LP and Grotech VII, according to Thomson Reuters data.
For a company with $800 million in equity invested, Amazon’s stake of 29% should shake out into roughly $234 million on the table—and a loss of more than $180 million. A cruel bit of irony: Amazon’s valuation of LivingSocial (a 29% stake being worth $52 million) means that the startup itself is now valued at just slightly under $180 million.
One winner in the LivingSocial plunge has been Grotech Ventures, which sold about half of its stake in 2011 for a whopping $200 million.
Image Credit: LivingSocial co-founder and Chief Executive Officer (CEO) Tim O’Shaughnessy speaks during the Reuters Global Technology Summit in New York May 19, 2011. REUTERS/Lars Paronen