NEWSJan 25, 2019

“Unicorn” Bursts, Becoming a New Market Darling

Since 2018, related topics on the concept of "unicorn" have become the focus of attention of all parties.

Previously, the management had released news that it welcomes unicorn companies which driving the rapid growth of the new economy to return to the A-share market, and stated that it would open up the IPO green channel for unicorn enterprises in four major fields, including cloud computing, biotechnology, high-end manufacturing and artificial intelligence. Unicorn Company is a term for the venture capital industry, referring to a start-up company with a valuation of more than US$1 billion that was founded for a relatively short time.

Early last year, the official definition of a unicorn enterprise was established. On March 30, 2018, the General Office of the State Council approved and transmitted the “Several Opinions on Launching Pilot Projects for Issuing Domestic Shares or Depositary Receipts within the Innovative Enterprise” of the China Securities Regulatory Commission, which clearly defined the criteria and mechanism for the selection of pilot enterprise targets. Pilot enterprises pointed to " innovative companies in high-tech industries and strategic emerging industries such as the Internet, big data, cloud computing, artificial intelligence, software and integrated circuits, high-end equipment manufacturing, and bio-pharmaceuticals, which are in line with national strategies, master core technologies, and have high market acceptance, as well as reached a considerable scale." Since then, China's capital market will officially welcome unicorn companies that have been listed overseas, while providing conditions for more unicorn companies to list in the country.

"Unicorn" Becomes a Hot Spot in the Global Market

In order to promote the development of the new economy, China's successive introduction of new policies to welcome the return of unicorn enterprises has excited the capital market. All walks of life, as long as they meet the relevant regulations, have the opportunity to usher in development opportunities. In recent years, with the rapid development of the Internet and science & technology, there are more and more unicorn enterprises in China. According to data from CB Insight, there were 237 unicorn enterprises worldwide from 2013 to March 2018, of which 62 were from China, accounting for 26.16%, second only to the United States. In terms of valuation, Xiaomi Technology, Didi Chuxing, and Meituan Dingping are ranked among the top five global unicorn enterprises.

In addition to the A-share market, the New York Stock Exchange has also joined the “unicorn” battle that has affected the global capital market. According to relevant reports, on April 3, United States local time, Spotify, the Swedish music streaming media giant, officially listed on the NYSE. It is worth noting that Spotify did not adopt the traditional IPO approach, but instead set a new path, landing the NYSE by way of direct listing, and becoming the first directly listed company in the history of the NYSE. The success of Spotify's direct listing on the NYSE opened a new path for unicorn companies. According to industry sources, if Spotify goes well after the listing, Airbnb, Uber and other similar "unicorns" are also very likely to go public by direct listing.

How to Treat Unicorn Concept “Refresh” the Screen

"Unicorn" has frequently occupied the financial news hot search list for a long time. The related policy of unicorn companies listing on the A-share market, as well as the NYSE acceptation of direct listing for the first time, pushing the continuously rising “Unicorn” to a climax. Although the return of "unicorns" in the A-share market or the new listing of the “unicorns” will be of great benefit to China's new economic development and industrial upgrading, the opportunity is always accompanied by risks. Some experts said that the entire "unicorn" concept may be over-hyped in the short term, and some companies may utilize heat of the topic to sneak into this area. Investors need to take a cautious approach to “unicorns” authenticity.

Although the Unicorn Index has continued to decline in the past week, Pacific Securities Chief Market Analyst Ji Xiaoxuan believes that due to the unicorn plate rose too fast, and the impact of recent trade frictions, the short-term decline is a normal phenomenon. Investors need to wait patiently, and the rising trend of unicorns is an inevitable trend.

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