Privately Held Unicorns add little value when Public

The problem with past adoration for those privately-held unicorns is they added most or all of their shareholder value and market capitalisation whilst they were a private company and leaving little capital appreciation for their publicly listed life.

In other words, many of those companies used the stockmarket to provide liquidity and an exit for their powerful shareholders, rather than using it to raise capital for the company’s expansion and growth purposes.

One example (and there are many), shares in Uber are lower than its IPO pricing of $45 nearly 2 years ago.

The chart below shows you the ride it has been on and while there is an argument for buying it at $21 and watch it triple to $63….

My message is to highlight the disappointment for the shareholder who was sold on their ubiquitous position in the market and their fully-priced valuation, while the financial press lauded their stratospheric rise under the fog of being a privately held company.

Well done to the bankers who priced and sold the stock to punters.

Oh well, onto the next deal for them, I guess !

The next chart below show the humble chart of Google.

As a private company Uber raised $25 billion over 33 rounds while Google raised a paltry $36 million over 4 rounds.

Google then raised $1.7 billion in the IPO giving it a market cap of $23 billion.

Uber raised a further $8 billion in the IPO giving it a fully diluted market cap of $84 billion.

Caveat Emptor!

January 20, 2022

by Rob Zdravevski

rob@karriasset.com.au

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