Two interrelated events are clobbering the value of unicorns, which are private companies, generally tech-related, that plan to go public with insanely bloated valuations based on VC funding and their own bogus Non-GAAP earnings. Established public companies like Facebook and Amazon are (finally) releasing GAAP earnings. This will force unicorns to do the same, which will kill their made-up valuations. Plus, Apple just made a huge investment in a ride-sharing company in China. It is so large it will adversely affect other unicorn valuations.
And what you ask, are Non-GAAP earnings? An example might be a company announcing that if their major manufacturing plant hadn’t blown up, if their new product launch hadn’t flopped miserably, and if the treasurer hadn’t been arrested for embezzlement, then earnings would have been just ducky. Non-GAAP earnings take all the bad stuff away, then pretend what it left is representative of the companies earnings. Basically, non-GAAP earnings are made-up rubbish.
Unicorns rely heavily on such MSU (Making Shit Up) earnings reports. Big companies reporting real GAAP will force them to actually be honest. Darn.
Further, Apple just invested one billion in Didi, Uber’s big competitor in China, a move that poleaxes Uber’s pretend valuation of $40 billion. And without that inflated spurious valuation, Uber’s mad fantasies of IPO riches go splat.
It just might be that Apple single-handedly opened the seal on the unicorn apocalypse.
Let’s remember “unicorns” exist primarily for one reason, and one reason only: to cash-out via an IPO rewarding everyone in-between.
$BILLION dollar valuations are built upon early (then subsequent) investor narratives as to help perpetuate buzz to cause an ensuing stock price bidding war in the “markets” once they debut. And that “narrative” is built upon metrics employed and reasoned by those initial investors. Or, said differently: “It’s worth Billions because we say it is.” Only in unicorn valuations can Non-GAAP accounting be made to look conservative.
So here we have what could be the poster-child for all unicorn valuation metrics (i.e., Uber) having their valuation story for future investment and/or IPO dreams gutted in one fell swoop by Apple.
Using unicorn math doesn’t that now make Didi worth Oh, let’s say – 1/4 of a $TRILLION? Talk about cutting the legs off from under a running unicorn with one fell swoop.