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Comment by myth_buster | Hacker News Reader

  absorb all the unicorns at their current prices

As to the second point, the "high prices" are in the private market and yes "that's what people (in private market) are willing to pay".

But that doesn't imply it would be the same in public market.

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"that's what people (in private market) are willing to pay"

And on top of that, investors paying those amounts are also able to influence their investment in ways they couldn't do as easily in public markets, whether it's buying a board seat, setting up multipliers, dilution protections and last in / first out agreements (and I'm sure others that I'm not even aware of).

The EMH says it shouldn't matter too much. The transition from private to public adds more liquidity for traders, but in accordance to the EMH it should work both ways (50% chance of buying or selling). Those who wanted to buy but couldn't will do so now that the shares are public, and some will sell. There should be no expected edge shorting companies that go public, after taking into account borrowing costs and other factors. The evidence suggests such a strategy would probably break-even, in accordance with the EMH.

https://qph.is.quoracdn.net/main-qimg-ef1c7da1ddf19c2c7c7d90...

Yes but how efficient is the market for private equity? It seems like all kinds of information in the private equity market is potentially hidden from bidders, including past prices.

A VC fund averages slightly better than the market, suggesting possible inefficiencies

But VC funds take on significantly more risk than a broad market, long-only index fund. So VCs need to yield a proportionately higher return, if we're comparing apples to apples.

https://en.wikipedia.org/wiki/Sharpe_ratio

Liquidity absolutely has a massive impact on prices. Less liquidity = less price discovery = greater volatility.

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