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Intelligize Report Puts Unicorns Under the Microscope

Intelligize Report Puts Unicorns Under the Microscope

As regulators and the financial sector fret over the attractiveness of the U.S. capital markets, so-called “unicorn” companies have become a hot topic around Wall Street watercoolers. Roughly 300 unicorns are running free in the wild. Inevitably, speculation around these alluring creatures turns to whether, and under what terms, they will undertake IPOs.

Unicorn companies are a little less mysterious following today’s publication of The Unicorn IPO Report from Intelligize. We compiled extensive data from our platform to produce an in-depth study of some of the more intriguing companies in business today: unicorns that have gone public.

Previously, we hinted at unicorns’ herd-like behavior, including trends in the companies’ decisions to go public or not. Now that the report is freely available, we can fill you in on more of the details.

  • When unicorns decide to hold IPOs, they often move quickly. According to our study, unicorns averaged fewer than 30 days from the time they filed their S-1 registration statements with the SEC to when they went to market in 2018. That period stretched to nearly 50 days on average for 2018 IPOs in the broader market.
  • Unicorns are widely using a special classification to limit their SEC reporting requirements. Nineteen of the 20 companies that went public in 2018 classified themselves as “emerging growth companies” (EGCs), a classification that applies to certain companies with revenues under $1 billion. EGCs enjoy lighter disclosure requirements than other publicly traded companies, including information on executive compensation.
  • Unicorns tend to guard executive compensation information tightly, rarely disclosing more information than required by law. Taking advantage of their status as EGCs, most unicorns studied disclosed the compensation of only their three top executives and did not disclose pay ratio for their principal executive officer.

Meanwhile, it shouldn’t come as a surprise if unicorns start facing scrutiny this year about the gender diversity on their boards of directors. A small fraction of the 2018 unicorn IPOs had female representation above 40 percent on their boards. Meanwhile, 12 of 20 unicorns that went public had no more than one female director on their boards.

Lastly, some unicorns have trouble giving up control. Six of the 20 unicorn IPOs from 2018 issued multi-class common stock shares, restricting the voting rights of shareholders. That group included Dropbox, which took in $756 million in its IPO. Ride-sharing service Lyft reportedly plans to take a similar approach when it goes public this year. The move would ensure founders John Zimmer and Logan Green have near-majority voting control of the company after its IPO. It’s a subject that’s likely to only draw more attention in 2019.

The same could be said for unicorns themselves; interest in them on the part of investors and the broader public shows no signs of slowing any time soon. We encourage you to read the whole Unicorn IPO Report to understand what all the fuss is about.

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