
Silicon Valley’s Unicorns Are Overvalued (2017) - Brajeshwar
https://www.gsb.stanford.edu/insights/silicon-valleys-unicorns-are-overvalued
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ohazi
"Some unicorns have made such generous promises to their preferred
shareholders that their common shares are nearly worthless."

Yup.

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oculusthrift
it doesn’t help that they use square as an example which had its last raise at
6 (they said that was overvalued) and now is worth 30 on open market

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jiveturkey
current valuation is irrelevant and doesn’t hurt the article at all. once a
company is public you don’t have to become a private investor and worry about
valuation. you can just buy shares on the open market.

the only thing that matters is the price at exit. and their point is made
quite well with square.

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ummonk
It's obviously a truism that the preferred shares will have a higher valuation
than other shares. And if you multiply the preferred share valuation by the
total number of share you'll end up with an "overvalued" number. That doesn't
tell us whether anyone is investing in at an overly high valuation though,
since they're actually investing in preferred shares...

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walshemj
What sort of preferred shares are they? the one I know of effectively a form
of debt with no voting rights.

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personjerry
This is based on the observation that the valuation "...doesn’t accurately
reflect the preferred treatment some investors might get, the researchers
say."

Which is irrelevant if the unicorn does well enough anyway.

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hodgesrm
That's not really the point of the article. It's saying that multiplying share
price from the last round by all outstanding shares overvalues the company.
The effect is increasingly relevant the further back in line you are for
payout.

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jiveturkey
i don’t think that’s correct, in that you (and the article) is lacking nuance.
the “valuation” is different for every investor. in fact for preferred shares
the value may be accurate. but for common shares it is not. before a company
goes public, there isn’t a single valuation. there’s a set of valuations.

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jiveturkey
article is 2017 but the paper was revised may 2018

