Case in point: Just days into the new year, a source familiar with China’s social-media/e-commerce startup Little Red Book told Bloomberg News it would begin a fundraising round aiming for a $6 billion valuation, double what it was worth after its last round, in 2018.
But do this and similar eye-popping valuations reflect the real value of these startups? According to a recent study published in the Journal of Financial Economics, the average unicorn is priced 48% above its fair value. Looking at 135 unicorns in the U.S., the authors found valuation inflation in every case, with the degree of overstatement ranging from 5% to 188%.
This story is from the January 27 - February 03, 2020 edition of Bloomberg Businessweek.
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This story is from the January 27 - February 03, 2020 edition of Bloomberg Businessweek.
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