14/09/2022 23:38 Warning: Unicorn Stocks May Be Nearing Bankruptcy, Fire Sales | Mind Matters

MIND MATTERS i

WARNING: UNICORN STOCKS MAY BE

NEARING BANKRUPTCY, FIRE SALES

Uber, Airbnb, and DoorDash seem so lifestyle-friendly … they

even became part of our vocabulary

BY NEWS ON SEPTEMBER 14, 2022 3 MINUTE READ

In an article today, Jeffrey Funk and Gary Smith puzzle over the way
investors have “rained cash” on unprofitable companies like Uber,
Airbnb, DoorDash, etc. Yes, they are icons of popular culture. No, unlike
Apple and Google, they do not make money: Here are their stats from
the table the authors offer:
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14/09/2022 23:38 Warning: Unicorn Stocks May Be Nearing Bankruptcy, Fire Sales | Mind Matters

Company Founded Funds Raised Cumulative Losses

Uber Technologies 2009 $25.2 billion $31.7 billion
Airbnb 2008 $6.0 billion $6.0 billion
Door Dash 2013 $2.5 billion $4.6 billion

Profits are elusive.

Only one of the 15 companies they list — including some other culture
icons — has ever had a profitable quarter:

“ Any hopeful arguments that profitability is just around the corner

ring hollow when every company is at least nine years old and two
are more than 20 years old…

Many unicorns will surely soon go bankrupt or be acquired at fire-

sale prices. A failure of Uber or WeWork would be 10 times larger
than the previous records for lost venture-capital funding. A wave of
unicorn failures would send tremors through financial markets, but
it is unlikely that the federal government would use a “too-big-too-
fail” excuse to intervene.
JEFFREY LEE FUNK AND GARY SMITH , “ANY ONE OF THESE 15 MONEY-LOSING COMPANIES
COULD BECOME THE STOCK MARKET’S BIGGEST ‘UNICORN’ FAILURE EVER” AT MSN (SEPTEMBER
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14, 2022)

The problem of profitless unicorns is global, they say, and it’s reasonable
to suspect that a trend toward inflation and recession will push some of
them over the edge.

The problem is not new. This from 2019:

“ More than 60 percent of more than 7,000 IPOs from 1975 to 2011
had negative absolute returns after five years in the secondary
market, according to a UBS analysis using data from University of
Florida professor Jay Ritter.
YUN LI , “DON’T BE FOOLED BY THE ‘UNICORN’ HYPE THIS YEAR, MOST IPOS LOSE MONEY FOR
INVESTORS AFTER 5 YEARS” AT CNBC (APRIL 3, 2019)

Jeffrey Funk noted the same thing at Wolf Street in 2021: “Today’s
unicorns have bigger cumulative losses than amazon, lost money far
longer than amazon, still no turnaround… Just because Amazon was able
to succeed does not mean others will. But they’re getting showered with
money.”

Why do investors throw money at unicorn stocks despite their record in

recent years? Could it just be the thrill of feeling part of the cool high-
tech crowd? We can only hope the investors don’t need the money they
are betting.

You may also wish to read:

How far will unicorn share prices fall? Cumulative losses give us some
insights.
With 56% of the 140 publicly traded Unicorns having cumulative losses
greater than or equal to revenues, many may never erase their
cumulative losses. (Jeffrey Funk, May 10, 2022)

and

Is rationality finally emerging for unicorn share prices? Share prices are
f lli l ti t t Th i d
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14/09/2022 23:38 Warning: Unicorn Stocks May Be Nearing Bankruptcy, Fire Sales | Mind Matters
falling as losses continue to mount. There is good news of profitable ex-
Unicorns, but a trend towards stronger profitability is fairly weak. (Jeffrey
Funk, January 24, 2022)

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