We’ve been asking ourselves in our investment management shop for some time if we have finally reached the peak of the “unicorn” phenomenon. For those who may be unfamiliar with the concept, it is a term now used to describe a venture-backed private company that has reached a $1 billion valuation before it goes public. The early pioneer in that realm was Google, who went public in 2004 at a $24 billion valuation.
Facebook went public in May 2012 with about a $104 billion valuation. Clearly, Google and Facebook have been successful post-IPO as Google (now Alphabet) is worth almost $980 billion. Facebook is worth about $624 billion. These early multi-billion IPO valuations were a distinct change from the previous IPO paradigm and led the way to a new era of companies waiting to IPO until their valuations were stratospheric compared to the preceding era.
For some context, in March 1986, Microsoft went public and its first trade on public markets was at $21 per share. It had 24.7 million shares outstanding for a total value of about $518 million. This was a big deal for the time, but it’s amazing to think that less than 20 years later (even with inflation considered) Google went public with a $24 billion valuation. Take a look at another 1980s iconic tech company: Apple.