The unicorn ranks continue to expand, with more than 200 companies in the US alone now holding the vaunted status. This expansion, together with the ongoing wave of potential unicorn IPOs, raises the question: Does unicorn status even matter anymore?
To examine what lies ahead for unicorn companies, Toppan Merrill commissioned Mergermarket to speak with four experts.
Toppan Merrill question: When a company becomes a unicorn, it often gains more media attention and public scrutiny. In your view, are there potential downsides to the new scrutiny these companies gain? Do you think it is always good for a company to become a unicorn? Leading industry experts weigh in...
Eric Sibbitt, O'Melveny & Myers says: Obviously, to be valued highly and be called a unicorn is what a lot of companies, especially tech companies, strive for. There are a lot of benefits in terms of media attention and general market awareness. After all, many companies are trying to become known names not only to be able to sell stock but in order to meet their actual business objectives. So it can be really valuable in that sense.
But it’s true that the more successful you become, the more critics and other people can scrutinize you. It's just like in a traditional IPO—often, as soon as a company files for an IPO, you see media editors or, say, people with intellectual property claims come out of the woodwork. Once you're seen as successful, you're also seen as an attractive target, and having the unicorn moniker helps to signal that you’re an attractive target.
Sean Ammirati, Tepper School of Business adds: I think this question comes back to the phenomenon of companies going public later than they did previously. Becoming a unicorn can certainly be a trigger for people to become more aware of these companies that stay private for a long time but have massive valuations. But I think relative to being a publicly traded company, it's a lot less scrutiny. So that's the scrutiny part of your question.
On the media attention point, I think it really depends on how much media attention they try to generate around gaining that valuation. Writing an article that company X is a unicorn is certainly one story that gets written, and every company has its own PR and media strategy. There are certain situations in which an entrepreneur uses that media attention to their advantage for recruiting, publicity, that kind of thing.
But I don't think that's universal either. Take a company like Palantir, which is certainly a unicorn—you don't see them using that for PR in the way some other unicorns do. When your business is selling to three-letter agencies, you probably don't want a lot of media attention. You still raise money at as high a valuation as you can, but you don't necessarily seek out media attention.
Finally, I would say that there should be public scrutiny on companies that are valued that high. You could argue that it’s one of the lost benefits of these companies going public earlier.
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