From Private to Public: The Influence of Unicorn Categorization on IPO Investor Behavior

51 Pages Posted: 5 Sep 2020 Last revised: 21 Jan 2024

See all articles by Badryah Alhusaini

Badryah Alhusaini

Arizona State University

Bradley E. Hendricks

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School

Wayne R. Landsman

University of North Carolina Kenan-Flagler Business School

Date Written: January 1, 2024

Abstract

We use the introduction of the Unicorn label to reference venture-backed firms with valuations above $1 billion to examine how firm categorization influences investor demand and retail trade activity. Our findings suggest that the positive appeal associated with an IPO firm’s Unicorn categorization increases public market investor demand, particularly among retail investors. Moreover, our findings indicate that the Unicorn categorization label affects retail trade activity both directly and indirectly through the mediating effects of news coverage. Additional findings reveal that there is no significant relation between Unicorn categorization and future operating performance and that Unicorn categorization relates negatively to post-IPO stock performance. Together, our findings shed new light on the interconnectedness between private and public markets by providing evidence that labels used to categorize private firms have public market spillover consequences.

Keywords: initial public offering, individual investors, media, financial statement analysis, unicorns

JEL Classification: G10, M13, M41

Suggested Citation

Alhusaini, Badryah and Hendricks, Bradley E. and Landsman, Wayne R., From Private to Public: The Influence of Unicorn Categorization on IPO Investor Behavior (January 1, 2024). Available at SSRN: https://ssrn.com/abstract=3663722 or http://dx.doi.org/10.2139/ssrn.3663722

Badryah Alhusaini

Arizona State University ( email )

Farmer Building 440G PO Box 872011
Tempe, AZ 85287
United States

Bradley E. Hendricks (Contact Author)

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
(919) 962-3619 (Phone)

Wayne R. Landsman

University of North Carolina Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-3221 (Phone)
919-962-4727 (Fax)

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