The situation of the unicorn has been presented, in which an undoubted explosion of the bubble has occurred. Thus, it has been expressed that unicorns are dying.
Certainly, the markets seemed to really wake up to the difficult situation of the unicorn when WeWork aborted its long-awaited IPO, but the air began to emerge from the unicorn bubble long before the disappearance of the WeWork IPO.
It is important to clarify that, when talking about unicorns, reference is made to private companies valued at more than $ 1 billion. Some examples of these companies are Lyft, Chewie, Uber, and WeWork which were WallStreet’s favorites. Their IPOs were highly anticipated by investors. They are also the protagonists of the easy money-induced market mania, and their IPOs were crucial in maintaining the bubble.
End of the bubble
It should be noted that the former Nasdaq CEO Robert Greifeld, through an article published in CNBC, compared the implosion of the unicorn with the bursting of the dotcom bubble.
Exactly Greifeld expressed, “WeWork’s aborted IPO may come to mark the end of the current” unicorn “bubble the way the scuttled merger between Yahoo and eBay signaled the start of the dotcom crash in 2000. Having become CEO of Nasdaq in 2003, I saw up close the damage caused by the growth-over-profits philosophy in that earlier era, and WeWork’s spectacular fall — from the year’s most anticipated IPO to a company with a speculative-level credit rating that may run out of funds within a year — rings many bells ”.
Likewise, Greifeld highlighted a series of comparisons between the dot-com mania and the frenzy of the unicorns.
In this way, it is understood that the dot-com and unicorn bubbles were made possible by the Federal Reserve policy that kept interest rates artificially low and allowed companies like WeWork to take advantage and operate for years without making a profit. Speculative money flowed to these companies.
Simply put, these companies never bothered to make a profit. They focused on the IPO. The strategy was to charge stock market investors who didn’t care if the company was making money or not.
Source: SchiffGold
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