Beware of the Unicorn Bubble 2.0

In the U.S. investment industry the term unicorn denotes a start-up company and often software / tech focused aka Silicon Valley.

Instead of investing in research / development, a lot of these companies have been buying their own stocks which causes their stock prices to rise. A big reason for this is that top employees are often paid with stock options for tax purposes.

To me this is like trying to stay healthy by eating your own vomit.

images

Now some companies are raising funding to pay bills by selling shares at lower prices than they had in earlier rounds. Such “down rounds” can hurt a startup’s chances at recruiting and discourage employees who are paid with stock options creating a nasty feedback loop.

I believe that for millions of ordinary Americans who jumped on the second tech bubble bandwagon, the hangover from the party of the last few years is just around the corner.

Eventually the lower pay from falling stocks will turn into pink slips.

In fact, as the chart below shows, for many it already has.

tech layoffs_0

Look out below!!

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About avirginiapatriot1776

I hope we have once again reminded people that man is not free unless government is limited. There’s a clear cause and effect here that is as neat and predictable as a law of physics: as government expands, liberty contracts. — Ronald Reagan
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