In an overheated market, the quality of business and earnings are often overlooked in favor of marked-up investments and metrics like unicorn and dekakorn. Grounding metrics and focusing on the historical mean are essential to identify market overheating and obtain accurate valuations.
In overheated markets, the focus shifts from quality metrics to hype like unicorn or dekakorn valuation, making it hard to differentiate a high-quality, valuable business from one that is overvalued.
The public valuations of companies serve as exit points for private markets and have a significant impact on its valuation. Understanding how public valuations deviate from the historical mean can provide valuable insights to investors.