The plight of unicorns

The unicorn has been an easy mark these days, even the humor is often more than merely biting.

There may well be a bubble growing in the laughter and critique, because the hobbling unicorn is likely not a WeWork situation only.

If and when this bubble pops, here are some fundamentals we might see below the surface:

  • A private market with no mechanism to express itself besides long-only and bullish is structurally predisposed to self-inflate.
  • An investment model that seeks outsized returns for outsized risk requires crazy optionality, the premise of the trade.
  • An environment where winners take the most in any field is one of fewer and more concentrated inlets for the money flows.
  • Add to all this the funding pools that grow as big as oceans, and each of these listed items will exponentially magnify.

Taking in this brief but comprehensive outline, the imaginary chart of where investment uses start and sources end feels like it’s made of thinning lines, and circular complicated arrows.

The edgy humor, therefore, in perspective:

Matt Levine, Bloomberg

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