Sy Kaufman and Michael Stark’s Crosslink Capital has made adjustments to two of its positions within the past week, according to separate Form 4’s filed with the Securities and Exchange Commission. In the first, it was revealed Crosslink continued to cut its exposure to Pandora Media Inc. (NYSE:P), as it disposed of 862,500 shares, bringing its total ownership of shares down to 8.34 million. In the second filing, Crosslink reported the sale of 22,700 shares of Equinix Inc (NASDAQ:EQIX), cutting its position to 58,700 shares.
Crosslink Capital is a dual-purpose firm, investing in both private (startup) and public companies. The firm recently closed its latest venture fund Crosslink Ventures VII LP, at $170 million, and has launched several initiatives to increase its chances of investing in promising startups, including the exclusive Alpha Club gathering of tech industry leaders and innovators. Founded in 1989 by Kaufman (who is now semi-retired) and Stark (who oversees all investment activity), who both previously worked at tech-focused investment bank Robertson Stephens, Crosslink is primarily entrenched in investments in the information technology sector, owing to the backgrounds of its two founders.
Crosslink has been a long-time investor of Pandora Media Inc. (NYSE:P), dating all the way beyond the digital media company’s IPO in 2011 right back to its formation in 2005. At the launch of Pandora’s IPO, Crosslink held 34.96 million shares, a position which it has benefited from greatly, as shares had nearly tripled by early 2014. In the midst of a strong runup through 2013 and early 2014, Crosslink began incrementally selling off its stake and taking profit from its investment, shedding 18.69 million of those shares by the end of the first quarter of 2014.
At the time it seemed likely Crosslink was simply liquidating some of its position to fund other projects, including its latest venture fund. However as shares have tumbled since then, and Crosslink continues to sell off the position, now having shed another 10.07 million shares over the past 11 months, one must wonder if they’ve lost faith in the company and its business model, and are simply cutting ties. Pandora has crumbled 49% over the past 11 months, and 15.48% year-to-date.
The most recent tumble took place on February 5 after Pandora failed to meet revenue expectations, and furthermore, announced weak guidance for the next quarter and fiscal 2015 that also came in well below expectations. Meanwhile, active listener growth for 2014 was just 6.5%, all of which led to three analysts downgrading Pandora the day following the earnings report. Nonetheless, Pandora remains by the far the most valuable and important position in Crosslink’s equity portfolio, with the remaining shares valued at $126.23 million. Crosslink’s equity portfolio at the end of 2014 was valued at $720.48 million.
Crosslink is also a long-term investor in Equinix Inc (NASDAQ:EQIX), dating all the way back to 2003 when it was the sole investor in a PIPE (private investment in a public entity). The networking company operates a number of International Business Exchange (IBX) data centers, which function as traffic hubs within the internet’s infrastructure. The company also operates Equinix cloud exchange, which is utilized by more than 100 cloud service providers and other organizations for easy updating and configuring the connections of multiple cloud services.
Crosslink helped Equinix explore various corporate development and acquisition options over the years, and has benefited greatly from the company’s continued growth. Shares have increased 40-fold since the beginning of 2003, when shares were trading at just $5.08 following the company’s 1:32 stock split at the end of 2002. Shares are trading at $223.94 in trading Wednesday afternoon.
Crosslink had largely disposed of much of its Equinix position by the middle of 2013, and there has been relatively little movement in its position in the company since. The latest sale reduces its holding to its lowest levels since it held just 60,000 shares in late 2012/early 2013. Equinix has also experienced a high volume of insider sales during 2015, which may indicate a broad consensus that shares have finally topped out. Shares of Equinix are down 1.31% in 2015.
Disclosure: None
