Re:Who pays when startup employees keep their equity?
by dharmon on Tuesday July 05, 2016 @08:20PM
(#12040444)
To make it a classic arbitrage you would hedge by shorting an "equivalent" asset. For example, if 1/1000th of JP Morgan Chase's assets are those also in your portfolio, then for every 1000 long shares you would short 1 share of JPM.
Since JPM is far from equivalent and most VC capital you don't have access to short, in practice I assume that a) you would assume that any startup receiving financing / investments at unicorn valuations is already a winner, and b) go long a sufficiently large and diverse basket to try to eliminate risk.
Unfortunately (a) is so far from true I'm not sure this would be an effective investment thesis.
Since JPM is far from equivalent and most VC capital you don't have access to short, in practice I assume that a) you would assume that any startup receiving financing / investments at unicorn valuations is already a winner, and b) go long a sufficiently large and diverse basket to try to eliminate risk.
Unfortunately (a) is so far from true I'm not sure this would be an effective investment thesis.