
Tech Unicorns Are Going Public at Near-Record Pace - jcfrei
https://www.wsj.com/articles/tech-unicorns-are-going-public-at-near-record-pace-11545138000
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tenpoundhammer
I've been working for a startup that recently exited it seems to be common
knowledge in the startup community( and everywhere else? ) that a recession is
just around the corner. I'm definitely not an expert in economics but these
are just the pieces I've put together.

From what I've heard/read the recession will primarily affect stock pricing
and available investment assets. Many startups feel that if they don't exit
now they will never have the opportunity or will have to exit with much lower
numbers. This seems like a strong driver of exits.

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ChuckMcM
It seems nearly everyone always believes that a recession, big disaster
slowdown, market crash, Etc is "right around the corner." And for the last 10
years they have been wrong in the macro sense :-).

That said, this was from the article: _" Many of the tech companies that
listed shares in the U.S. were based in China, including some of the largest
IPOs of the year, such as online-entertainment services company iQIYI Inc. and
Chinese e-commerce company Pinduoduo Inc."_

The Chinese economy is reacting in all sorts of ways to its new larger size,
pressure from the US in trade wars, and pressure at home to spread some of the
prosperity around. If you take all of the Chinese companies out of the list,
the IPO statistic is unremarkable.

What I find most interesting is the Unicorn do or die issue. Which is that
many may find it impossible to go to the private equity trough again, that
bubble does seem to have deflated. Valuations aside, when you have _raised_
over a billion dollars that is real money that somebody is going to miss it if
you just roll up the carpets and go home.

It felt to me that the collapse of Theranos woke up a lot of 'stupid' money
(that is money from people who are investing in a fad but without research).
And those folks have said, "Hmm, ok now I'd like to sell my equity in this
company you guys say is worth $X, that means you will pay me $Z for my stake
right?" Only to find it doesn't work that way, there are no buyers, no
liquidity as they say, for those preferred shares. But they can vote and they
can tell the CEO, you're not getting another penny from us, we'd like to sell
our shares. And that leaves the public markets as the investor of last resort.

So it does feel like a Unicorn reckoning is to be had. Where companies will
have to prove that a cruel and unemotional market will agree with their lofty
valuations. They won't all make it over that hump. As the Vikings might say,
"There will be songs sung about these days."

~~~
moorhosj
==It seems nearly everyone always believes that a recession, big disaster
slowdown, market crash, Etc is "right around the corner." And for the last 10
years they have been wrong in the macro sense :-).==

This isn't accurate, you are implying that people have been calling for a
recession since before the last recession ended in June 2009. That doesn't
pass the smell test.

==Where companies will have to prove that a cruel and unemotional market will
agree with their lofty valuations.==

The claim that the market is "unemotional" is laughable. If that were the case
everything would be properly valued based on the exact same criteria. For
example, Elon Musk saying something controversial doesn't change the
underlying business fundamentals of TSLA, but it sure moves the stock price.
An "unemotional" market wouldn't react to an expected Fed action like they are
right now (S&P down 2.1%).

~~~
rue
The market isn’t related to the companies it ostensibly comprises at all.

Any changes are related to the expected value of the _stock_ , not the company
itself.

~~~
moorhosj
==Any changes are related to the expected value of the stock, not the company
itself. ==

How are these different things? Company stock represents an equity percentage
of the underlying company.

~~~
rue
It’s the share that’s being traded. It doesn’t matter whether it represents
reality. All that matters is that the guess about whether it appreciates or
depreciates is correct.

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mrnobody_67
VCs have 10 year funds... many of the investments made in 2007-2009 are fully
mature, and VCs need to return cash to LPs.

~~~
krn
Interestingly, 2007-2009 is exactly the period during which Airbnb, Uber,
Dropbox, Github, Spotify, Quora, Evernote and Kickstarter were founded.

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geodel
Am I misremembering or was there really an article few months back that a lot
of tech unicorns prefer private money over public and hence deny public a
chance to make money via stock market.

~~~
terragon
I remember reading the same sometime ago, and on reading this headline, I was
glad for a little while until I started reading the comments.

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lgleason
Given what I'm seeing with this and on the ground with startups we are
definitely in a bubble.

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mmanfrin
I wonder if this means startup funding will be a bit plusher in the coming
years.

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trhway
Add also the 11th hour acquisitions.

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AchieveLife
Non paywall link: [https://outline.com/bUYzWn](https://outline.com/bUYzWn)

My opinion: The bubble expands.

~~~
maxxxxx
I think the bubble is ending. They want to convert their phantasy money into
cold hard cash from retail investors (aka "suckers") before it's too late.

~~~
adventured
The interesting thing about the rush is that they're already too late. They're
going to have to accept mediocre exits (versus prior expectations), or abandon
their IPO plans.

The growing weakness in the IPO markets can be seen eg in the recent Softbank
IPO. Globally synchronous growth has become a globally synchronous melt (from
housing in Australia & Canada, to EU growth forecasts, to China, and US
forecasts eg FedEx today, to commodity markets). Junk stocks like Blue Apron
have already burned to the ground. GrubHub has been chopped in half. Facebook
is already sporting a value stock-like ~16 forward PE (imagine what it might
fetch in a recession, 12 times earnings?).

There are dozens of prominent, younger tech stocks that face a very painful
valuation reckoning soon. What are Spotify, Workday, Box, Dropbox, ServiceNow,
Twitter, et al worth if you drain all the froth from the market? Is Shopify's
billion in sales really worth a $15b market cap, or more like $5b? Is PayPal's
modest growth really worth ~50 times earnings, or half that? Trillions in
paper wealth are about to be vaporized and all it took was 2.x% interest
rates. Welcome to Japan, where rates can never again be allowed to rise
because of the debt load (both corporate and fed govt), and the stuck-in-the-
mud debt model guarantees perpetually slow growth as the debt eats away at
your capital available for productive purposes (just 1/4 annually of our
public debt interest cost now would repair all of our infrastructure over a
decade, instead we're stuck forever paying for the wildly irresponsible
spending from the last ~14 years; 25-50 years from now, that debt will _all_
still be sitting there eating the budget, and or American wealth via currency
debasement to paper over it gradually).

~~~
lotsofpulp
And that public debt interest doesn't even include unfunded defined benefit
pension and OPEB (other post employment benefits, e.g. retiree healthcare). I
would expect more toll roads, higher taxes, less services, and means testing
for social security and medicare.

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BrainInAJar
rats, titanic, etc.

