The magic behind unicorn startups

NEW YORK: Unicorns aren’t real, and neither are the valuations ascribed to many of the startups that say they’re worth US$1bil or more.

About half of private companies with valuations exceeding US$1bil, known as unicorns, wouldn’t have earned the mythical title without the use of complex stock mechanics, according to a study by business professors at the University of British Columbia and Stanford University. The tools used to negotiate a higher share price with investors often come at the expense of employees and early shareholders, sometimes drastically reducing the actual value of their stock.