If the public markets are any sign of the future, unicorn valuations will be difficult to understand. Public companies are an indicator of comparable private companies. Public companies are also the most comparable to any private business when seeking valuations because they are constantly being priced during the day with various buyers and sellers. Although private companies are protected from the volatility of the daily public markets, private companies have very uncertain valuation numbers especially when they are juiced up.
Even though public companies are public, their valuations are uncertain. An example is seen here with Linkedin ($LNKD) and Tableau Software ($DATA). Over night their valuations were annihilated. LinkedIn has $9.6 billion (-43.63%) and Tableau Software has $2.1 billion (-49.44%) valuation disappear in 24 hours.
As we can see, Wall Street does not hold back. Eventually these private companies need liquidity for insiders, investors, or expansion. They either raise another round of fantasy juice, get bought out, or do an initial public offering (IPO). During this process, valuation is re-analyzed. If the public markets are any indicator of the future, be mindful of any private company hiccups.
Is this the start of “The Disappearing Unicorn Act?
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