Word of the Day – Unicorn Money-Sinkholes

Several years ago we got an invitation to come to an investor’s meeting in a nearby city where a miniature golf course was to be opened.

We weren’t investors, but we wanted to see what an investor’s meeting was like. I’m a long-time fan of golf and miniature golf courses.

So, we walked into a small office space that was under construction to turn it into an indoor mini-golf and mini-race car track amusement place.

Only half the holes had been built, there was plywood and tools and paint cans galore sitting around. There was also food and drink on the tables in the front.

Lots of people were milling about and we met the woman who was the carpenter building the golf holes. She regaled us with her story of meeting the owner of the place at a party after losing her job.

Then the meeting began in the second-floor loft where the owner had an office. A whole lot of men went upstairs to listen to the owner’s pitch for their money.

We hung around for awhile, played a few holes and went home happy.

How Times Have Changed!

Angel investors are all over TV and in the news. It seems like a whole lot of guys have money to burn in hopes of getting rich on startup companies. This is not much of a woman’s world.

Being an angel investor has since become big business. This how unicorn companies have come into existence. Companies like Wayfair, Uber, Sofi, WeWork, Carvana, Zillow, and Tesla were born.

These companies do not make profits, they simply exist because investors think they are worth something. They lose tons of money year after year without ever hoping to make a profit.

And now they have a real problem. Small entrepreneurs have been edged out by these big  publicly-owned companies. Wolf Richter reports that as a result, nearly 40% of listed US companies lost money last year.

IPOs have crashed and burned. I’m aware of one company that went public, and then it’s shares dropped so low in price that it had to do a reverse-split, combining shareholder’s stocks at a 1-8 ratio to get their stocks over $1.

These are possibly some of the companies that got parts of the stimulus money this year that should have gone to laid-off employees. Like the dot-com bust, these are the leaders in the unicorn-busts of our future.

How is that there is so much investor money floating around that the stock market can afford to support such a swiss cheese bubble?

These companies are imposters. They’re basically poker card players, or ponzi schemes that draw suckers in.

My advice is investors, do your research on the fundamental value of a company before putting your hard-earned bucks there.

For more example of Unicorn Companies, see What Unicorn Money-Sinkholes Actually Disrupt at Wolfstreet.com.