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Matt Levine

Unicorns Leave the Enchanted Forest

Also CDS and BDCs.

“Private markets are the new public markets,” I keep saying, as giant private tech unicorns like Uber Technologies Inc. and Lyft Inc. and Airbnb Inc. and Palantir Technologies Inc. and WeWork Cos. and Slack Technologies Inc. raise billions of dollars from investors at public-company-like valuations while becoming household names, employing lots of people, doing business around the world, and generally looking as big and important and well-funded as public companies used to be. But what if that is just an accident? It is true now, and it was true a year ago, but it might not be true next year. Uber and Lyft both confidentially filed for initial public offerings recently, and Airbnb and Palantir and WeWork and Slack are all rumored to be thinking about going public soon. Plenty of other companies have recently left the Enchanted Forest of the Unicorns for the open meadows of the public markets, and they’re basically fine. 

Perhaps a new generation of unicorns will grow up to replace Uber et al. Or perhaps not; the list of big unicorns in 2018 looks a lot like the list of big unicorns in 2016, except shorter. I have generally argued that the rise of unicorns is a deep feature of the economy, as it has become easier for U.S. companies to raise money privately due to more global pools of capital, more concentration of wealth in the hands of private investors, better technology to reach potential investors, etc. But it is also possible that structural choices about whether your giant multinational corporation should be public or private are essentially fashion-based. Once upon a time it was cool to ring the opening bell on the stock exchange, so founders of hot tech companies raced to go public so they could ring that bell. Now it is cool to be a unicorn — a mythical beast! — and companies stay private longer. But as the cool unicorns go public, the Enchanted Forest might start to feel less enchanted, and maybe it’ll be cool to be public again.