Investment Bankers Forecast Serious Correction In Valuations of Tech Unicorns According to BDO USA, LLP

July 2016

Chicago, IL – According to a new study by BDO USA, LLP, one of the nation’s leading accounting and consulting organizations, a majority (52%) of capital markets executives at leading investment banks are predicting a serious correction in the valuations of so-called “tech-unicorns” – private companies with disclosed valuations of more than $1 billion.  Last year, in order to gain additional funding, some of these businesses went public at valuations considerably below their most recent round of private financing.  An overwhelming majority (85%) of bankers believe there will more of these type of offerings moving forward. 

“In recent years, the widespread availability of private funding at attractive valuations has led to a dramatic drop in the number of IPOs coming from the technology sector, the historical leader in offering activity.  Instead, there are now more than 140 technology businesses privately valued at more than $1 billion, yet just one of these companies has pursued an IPO in 2016 as they fear their private valuations won’t stand-up to scrutiny in the more discerning public markets,” said Lee Duran, Partner in the Capital Markets Practice of BDO USA.  “As new rounds of private financing reflect more realistic valuations, unicorns will increasingly be faced with a choice between being acquired or going public.  Either way, the actual profitability of these businesses will be given much greater weight versus projections of future performance.”

Moreover, if private valuations continue to exceed those of public markets, a majority (55%) of the capital markets community anticipate some of these “unicorns” will fail.  When asked how many, the consensus was that approximately 17% will not survive.

The BDO IPO Halftime Report is a national telephone survey conducted by Market Measurement, Inc., an independent market research consulting firm, on behalf of the capital markets practice of BDO USA.  Executive interviewers spoke directly to 100 capital markets executives, using a telephone survey conducted within a scientifically-developed, pure random sample of the nation's leading investment banks.
BDO USA is a valued business advisor to businesses making a public securities offering.  The firm works with a wide variety of clients, ranging from entrepreneurial businesses to multinational Fortune 500 corporations, on a myriad of accounting, tax and other financial issues.


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