All Billion Unicorn Valuations are not the same
With many new Billion dollar ( or pound ) Unicorns appearing everyday and few of them IPO’ing I started to wonder why investors or founders were not cashing in on the public markets and selling some of their stock and putting some of those pennies in their bank accounts. I was genuinely confused. So I started reading every article I could find and then it dropped and it was obvious:
Lets say Doug’s Hedge Fund decides to invest £1 billion in Uba at $100 billion ( a valuation much higher than anyone else is valuing the company currently). I have just done a really bad deal???? Not quite:):)
Doug’s Hedge Fund has a lovely little clause in the documents that states that what ever happens in the future my hedge fund will get the first £1 billion back plus I will get some uplift based on some criteria.
Thus really this is no longer an equity investment in the normal manner but a loan, guaranteed by the company.
I have included a couple of the articles that I found explaining the situation.
Doug
http://recode.net/2015/05/10/heres-one-thing-all-the-billion-dollar-unicorns-have-in-common/