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Unicorns Dropping Like Flies: First Dropbox; Then Square; Now Fidelity Cuts
Snapchat Valuation By 25% | Zero Hedge
"And here is the stunner: *the combined "valuation" of total US unicorns is
$486 billion. Their combined profit? $0"*


http://www.zerohedge.com/news/2015-11-10/unicorns-dropping-flies-first-dropbox-then-square-now-fidelity-cuts-snapchat-valuati

Unicorns Dropping Like Flies: First Dropbox; Then Square; Now Fidelity Cuts
Snapchat Valuation By 25%

First it was Dropbox.

Two weeks ago we reported
<http://www.zerohedge.com/news/2015-10-20/tech-bubble-pops-dropbox-warned-it-cant-ipo-its-private-valuation>that
one of the numerous "unicorns" prancing around Silicon Valley was about to
have a very rude wake up call when Dropbox was warned by its investment
bankers *that it would be unable to go public at a valuation anywhere near
close to what its last private round (which had most recently risen to $10
billion from $4 billion a year ago) valued it at.*

Than it was Jack Dorsey's "other" company, Square.

Last last week
<http://www.zerohedge.com/news/2015-11-06/tech-bubble-unravelling-square-go-public-30-discount-latest-private-round>:
"today another company realized today just how big the second "private"
tech bubble, one we profiled first in January of 2014, truly is. That
company is Jack Dorsey's Square, which earlier today filed a prospectus in
which it said that the "initial public offering price per share of Class A
common stock will be between $11.00 and $13.00." Assuming a mid-point price
of $12 and applying the 322.9 million shares outstanding after the
offering, *it means a valuation of $3.9 billion*. *The problem is that in
its last private fundraising round, Square was valued at about $6 billion
according to ReCode.*"

Today, it's the turn of Snapchat, the fourth most highly valued private
tech start up.

According to FT
<http://www.ft.com/intl/cms/s/0/20bda38c-874c-11e5-9f8c-a8d619fa707c.html>,
"Snapchat has been marked down by one of its most high-profile investors,
raising further questions about the soaring valuations of private
technology companies. *Fidelity, the only fund manager to have invested in
the four-year-old company best known for disappearing photos, wrote down
the value of its stake by 25 per cent in the third quarter, *according to
data from investment research firm Morningstar. It had valued each share at
$30.72 at the end of June but dropped the valuation to $22.91 by the end of
September."

It is unclear why Fidelity marked down its stake but Snapchat is still
searching for a sustainable revenue model.

It is also unclear if other Snapchat investors, such as VC titans Benchmark
and Kleiner Perkins, as well as tech companies Alibaba, Tencent and Yahoo
have followed Fidelity into what is becoming a widespread realization that
not only was there a private tech bubble, but that it has burst.

A bigger question is whether it will be a controlled demolition as unicorns
everywhere are demoted to what we first dubbed "zerocorn
<http://www.zerohedge.com/news/2015-11-06/tech-bubble-unravelling-square-go-public-30-discount-latest-private-round>"
status in the coming days. To be sure, the VCs are desperate for a
controlled demolition, and hoping the broader market ignores the euphoria
that took place in Silicon Valley over the past 3 years, is now over, and
that giddy investors overshot by at least 25-35% to the upside in the past
several private funding rounds as everyone was rushing to pass the
valuation hot potate to ever greater, and richer, fools.

It remains to be seen how successful they will be, and just what the source
of capital for hundreds of "$1+ billion"-valued, *cash burning* companies
will be in lieu of generous VCs, and just how viable the second tech bubble
will be if these hundreds of companies suddenly are forced to generate cash
flow to fund themselves.

One thing we know: there sure are *many *of them, as this infographic
<http://graphics.wsj.com/billion-dollar-club/>from the WSJ proves:

<http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/11/unicorns%201.jpg>

<http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/11/unicorns%202.jpg>

<http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/11/unicorns%203.jpg>

And here is the stunner: *the combined "valuation" of total US unicorns is
$486 billion. Their combined profit? $0. *
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Eric D. Schwerin
eschwerin@rosemontseneca.com

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