A hedge fund stung by losses this year due to its heavy investment in the faltering tech sector has cut an $81.6 million stake in data storage company Pure Storage Inc. (PSTG, Financial).
Chase Coleman (Trades, Portfolio)’s Tiger Global Management 6.8% return in 2015, beating the S&P 500’s 2.2% decline, turned to a 22% drop in the first quarter as top positions in Amazon (AMZN, Financial), Netflix (NFLX, Financial) and JD.com (JD, Financial) sagged. In 2015, growth stocks like Amazon and Netflix were the top performers of the S&P but exorbitant valuations caught up with them as value stocks began a rebound in 2016.
On April 4, Coleman sold 81% of his 5,242,615-share stake in Pure Storage Inc., keeping 1 million shares. The 4,242,615 shares he sold were converted from B shares he invested before the company’s initial public offering, which had 10 votes each, to A shares permitted to trade on the open market, which had one vote each. His remaining 1 million shares were of class A common stock he had in combination with the B shares.
Coleman disclosed the position on Oct. 7 when Pure Storage went public. The company’s business is to provide all-flash enterprise storage that improves performance and efficiency over traditional types of storage and reduces cost. It has received wide attention, with Tech Crunch calling it “one of the hottest Silicon Valley enterprise startups for the past several years.”
Pure Storage's revenue has rocketed from $5.5 million in 2013, to $39.23 million in 2014, to $154.84 million in 2015, according to its IPO filings. But net losses grew in tandem, from $23.4 million in 2013 to $183.9 million in 2015, with strong investment in research and development. This indicates another company in which investors have traded profit for promise of high growth.
The company’s shares opened trading at $17 each, valuing the company around $3 billion, and have since declined 14.7% to $14.50 on mid-day Thursday. It still had a market cap of $2.86 billion.
Though Pure Storage’s stock price has not lived up to the company’s hype so far, prominent investors Stanley Druckenmiller (Trades, Portfolio), George Soros (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) disclosed positions in the fourth quarter.
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