The coronavirus-induced economic downturn is putting pressure on the sky-high valuations for Chinese unicorns.

That’s the message coming from a new Reuters report, which says some investors are looking to offload their stakes in China’s bumper crop of $1 billion-plus tech startups as their valuations fall below levels reached in recent funding rounds.

The selling comes as the global pandemic has created liquidity pressures for some venture capitalists that invested in the fast-growing group.

Two investors who were offered such shares told Reuters that potential buyers of privately held shares have been approached more actively since the pandemic started spreading across China in February.

Secondary market trading shows that artificial intelligence startup SenseTime and commercial drone maker DJI have seen valuations fall 10% since funding rounds in June 2019 and April 2018 to $6.84 billion and $14.5 billion, respectively, which were just two examples the unnamed sources gave Reuters.

U.S.-listed Luckin Coffee’s confession to fabricating sales for much of 2019 has also dampened investor confidence in Chinese unicorns. A senior China-focused investment banker at a Wall Street bank told Reuters that the scandal would lead to a “temporary freeze” on applications by Chinese companies for U.S. IPOs.

Venture capital investors sold out their stakes in 25 Chinese deals with combined value of $13.36 billion in the first quarter of 2020, compared with just nine such deals worth $5.34 billion in the same period last year, Reuters said, citing statistics from PitchBook. Venture funding in Chinese firms also dropped 33% to $8.39 billion over the same period.

Contact reporter Ding Yi (dingyi@caixin.com)

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