Department of Economics

This paper seeks to develop and analyze a relationship between venture capitalinvestment, rhetorical corporate strategies, and public stock performance. Examiningevery firm since 2000 that went public at a market cap of 1 billion USD or above, I analyzethe rhetoric of unicorns and its relation to risk. Using SEC archives of S-1 financialdocuments and two sentiment dictionaries, I attempt to capture levels of positive languagein firms’ business summaries and negative language in its risk factors. Using this data, Itest the correlation between a firm’s venture capital investment and its S-1 language, aswell as the relationship between a firm’s S-1 rhetoric and its ensuing stock performanceas a public company. A significant positive correlation is established between venturecapital investment and a firm’s levels of positive language in their business summaries, aswell as a significant positive correlation between venture capital investment and a firm’slevels of negative language in their risk factors. Impacts of business summary language ondaily, weekly, and monthly returns after a firm’s IPO are negligible.