Trading Tips

Invasion of the Unicorns

June 18, 2019
Trading Tips
Invasion of the Unicorns
Chapters
Trading Tips
Invasion of the Unicorns
Jun 18, 2019
Trading Tips
Given how Uber’s market valuation is nearly $60 billion in spite of a weak IPO, however, investors may want to look elsewhere.
Show Notes

In Silicon Valley, there are hundreds of privately-held companies known as “unicorns.” That’s a term for a company that has a valuation of over $1 billion based on the last round of equity they sold to private investors.

Many of these unicorns will continue to grow and increase in value. Others will fail. A handful will go public. A few have already gone public this year, with more on the way.

Some of the biggest names this year have been the ride-sharing companies. In this space, the biggest company in terms of market share is Uber (UBER). However, it let competitor Lyft (LYFT) go public first—and given how Lyft shares have failed to rise past their initial publicly-traded price, Uber shares look likely to do the same.

Given how Uber’s market valuation is nearly $60 billion in spite of a weak IPO, however, investors may want to look elsewhere.

At a $60 billion valuation, the company still doesn’t make money, and has even indicated that it may never make money. That doesn’t mean it will fail anytime soon, but it does mean that the best thing Uber can do for folks is save them money on rides compared to cabs.

Investors looking to tackle a high-valued company going public would be best to look elsewhere and away from bigger and more well-known names to avoid the risk that comes from buying a highly-valued firm to begin with.

One alternative is Beyond Meat (BYND). Although the company just went public and its shares have doubled, its overall valuation is more reasonable. It’s on track to move from generating revenue to actually making a profit and having earnings for investors.

And it’s just scratched the surface of its market potential in plant-based meat alternatives. That’s a far cry from the saturated ride-share market where the biggest names went public at hefty valuations.

In investing as in time, it’s all relative. And relative valuations matter. If you’re looking for a new play in today’s booming market, look no further than some of the smaller IPO plays out there like Beyond Meat.

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