A major investor in Snapchat has written down the value of its stake in the popular mobile app, which allows users to send and receive disappearing photos.

Fidelity Investments is the only fund manager to invest in the app, and valued its shares in Snapchat at $30.72 at the end of June. According to data from Morningstar, that valuation was reduced to $22.91 at the end of September, a 25% decrease in just one quarter, writes Jillian D’Onfro for Business Insider.

Fidelity Marks Down Snapchat Stake By 25%

Report based on Morningstar data, compared with Fidelity filings

Fidelity quarterly filings made in May and August reveal that its Snapchat shares maintained a constant value over that time period, but a document filed on September 30 shows a lower market value. Consequently it appears that Fidelity data confirms the data used by Morningstar, assuming that the fund didn’t sell any of its shares in Snapchat during September.

News of the write down may lend weight to the argument that many private Silicon Valley companies are valued too high given that many make little to no profit. Bill Gurley is one investor that has called for startups to go public sooner given the fact that they have raised hundreds of millions of dollars in funding. On the other hand Marc Andreessen claims that the markets are too harsh on tech companies.

Different mutual funds use different methods of valuing startups, but one popular way is to measure the value of similar publicly listed companies. If the value of a comparable public company falls, fund managers are likely to devalue private startups too.

Snapchat struggling to build profitable business despite strong user base

Fidelity and BlackRock also recently wrote down their stake in data-storage company Dropbox, which was last valued at $10 billion. While Snapchat is hugely popular among millennials, with 100 million active users every day, it is yet to demonstrate its ability to build a profitable business.

Given criticism from investors, Snapchat has been revising its revenue model and is set to generate $100 million in revenue on an annualized basis due to improved advertising efforts. In 2014 the company generated $3 million revenue from $128 million losses.

Despite the improvement many advertisers believe Snapchat does not offer a sufficient number of targeting options or analytics. As it stands Snapchat makes money charging businesses to sponsor photos or videos, or by creating their own custom photo filters.

 

Snapchat Fidelity
Data via S&P CapIQ