Anatomy of an IPO Valuation | WSJ

Unicorns are getting haircuts, meaning high-flying startups are seeing their valuations shrink when they go public. WSJ explains why differences in the private and public markets are bloating what these companies might actually be worth.

More from the Wall Street Journal:

#WSJ #IPO

[jamesoo]

It is just a crime that WE company did not include the rent expenditures into ipo report, when rent is just 90% of their expenses

[anujmittal]

We need more of this type of videos (educational)

[ashishxx]

It is easier to convince one Pvt. investor to buy 1% stake for $10m and get valued at $1B, than to convince thousands of market participants of that valuation.

[edorofish]

How can a company be overvalued by $32 billion dollars? That is a serious accounting problem! Almost criminal!!

[MangoMotors]

So many startups seem like scams. Over value, take the cash, shut it down, and start again

[cocainebear]

Good tutorial to help value my cocaine trafficking company in preparation for the IPO next year

[KuzzatAltay]

Really appreciate this videos. Thanks to the people who made this!

[ericlam]

The book Blitzscaling talks about the logic behind why these companies like Uber and WeWork do what they do. The thought process is illogical but for some like Facebook and Amazon it has paid off, they end up jumping into other markets to generate the bulk of their revenue Advertising (FB), AWS (Amazon). The book talks about how most of the time blitzscaling will blow up in the founders face. With so many companies using this illogical logic now, it makes it harder to compete when everyone is blitzscaling and there are no barriers to entry. More content like this WSJ. This video was great.

[ozzyfromspace]

Don't forget kids: $100 for 1% gives your company a $10k valuation, because your uncle likes you, not because your startup is actually worth that much. Private investors are like your uncle...always setting valuations, just because.

I wish startups could just get back to basics: sustainable practices, sustainable profits, growth is not forever. I see so many people that might say, "imagine I owned 10% of a billion dollar company ($100M)". If you sell your position, you can only do it once. Imagine creating a business that makes you $100M yearly, so you can get $100M several times over. Point is, profits are actually really attractive. Growth can be quite the vanity metric, as most high-growth startups tend to be chronic money-losing businesses

[bachibouzoul]

" community Based EBITEDA excluding real estate costs "... For a real estate company 😂😂. And investors still signed checks after seeing this?

[OfficialFON]

I’m gonna have to watch this a couple of times.

[takoleta]

Thanks WSJ for this educational video. Worth very second. Keep making theses kind of videos

[SudaNIm]

Of course; Private investment demand is driven by a desire for ”Margin” alone rather than real ”Utility” which creates perverse incentives.

[andypotanin]

I always thought it was called "preferred stock", not "preference stock". Great video!

[skolarii]

IPOs are set higher so that private investors and VCs can cash out at public investor expense

[AntonioCostaRealEstate]

Old saying ....only fools rush in. Glorified office sublet company with loads of hype. And now understating rental costs, or 70 % of their cost structure ( someone suggested 90%, let’s not forget payroll, furniture expending, marketing ).

You can run a successful co working enterprise, for as long as you own the real estate. And even then, you are still at risk of market saturation. This is a low barrier of entry type of industry.

[AmorosoGombe]

At last there is a trend towards sanity in start up valuation. 'We' has no real sustainable competitive advantage. It's just a trendy serviced office. I see so many real start ups with sensible products getting turned down then you see a company like 'We' being given billions of dollars and you have to really wonder about the sanity of some VCs.

[abhinavhansaraman]

Hi, at around 3:00, you said that preference shares and common stock are valued the same. Why does this mean that common stock is over valued but not that pref shares are undervalued? would be great to hear from someone who could explain this. thank you.

[KrutarthBhatt]

Wsj content editor: this video might pull in dislikes
Wsj intern: cool bruh, I will disable the counter!
It is all cool in the hood.

[yakkyuu]

I LAUGHED at the 1:22 mark!!! " analysts contend it carry's a BiAS to HIGHER price"!! There ARE FEW traders who DON'T understand the prices IPO's AND multitudes are ALL RETAIL MARK-UP prices --- AND WORSE! A 400% mark -up on IPO'S is on the LOW side and ALSO on MOST stocks!! The different TRANCHES of A, B, C levels are ALL getting in AT ABSURDLY low prices! It IS the NORM for management to become MULTI MILLIONAIRES ON BAD IPO'S( just LOOK at Adam Neumann of WEWORK), he IS NOT the ANOMALY!! Wall street talks about the RISK of going public! there is NO RISK to the management!!! they ALREADY got theirs!! So WHAT, if they DIDN'T get BILLIONS-- the HUNDREDS of Millions will be MORE than sufficient! the REAL RISK is to the RETAIL investor!!! Who MAKE UP the MAJORITY that ARE NOW ---- DEPENDENT on the MARKETS for their retirement and EVEN their GENERAL Financial --- SURVIVAL!!