According to TechCrunch, 151 private companies around the world passed the $1 billion valuation mark in 2018. Collectively, they managed to raise a whopping $135 billion.
Where do these unicorns go? Last year, 39 had initial public offerings and another 14 were acquired. All told, 144 companies have seen exits, with 68% going public and the other 32% being acquired.
Once they hit the brokerage accounts, however, it’s a whole different ball game. Retail investors are not as forgiving as VCs, or maybe they just refuse to look at losses as investments (eye roll).
Only 38% of IPOs have outperformed the S&P 500 over the last ten years. That’s actually not so terrible, but the magnitude of relative performance clearly skews negative, as you can see in the chart below.
I think the explosive growth in private markets is a net positive, but what’s not so great, at least one would think, is that of the 25 largest IPOs of 2018, 15 of them were losing money.
It’s hard to imagine a world in which 2019 eclipses 2018. But you could have said the same thing in ’17, ’16, and ’15. Maybe this is the sequel to the dot com bubble, or maybe things are different this time, which is actually true like 20% of the time.
Michael Batnick is a managing partner at Ritholtz Wealth Management. He is the co-host of Animal Spirits, What Are Your Thoughts, and The Compound and Friends. For disclosure information please see here.
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