It turns out the vaunted “Unicorns” of Silicon Valley may have a lot more in common with bucket shops than they do with any meaningful technological innovation:

Unicorns aren’t real, and neither are the valuations ascribed to many of the startups that say they’re worth $1 billion or more.

About half of private companies with valuations exceeding $1 billion, known as unicorns, wouldn’t have earned the mythical title without the use of complex stock mechanics, according to a study by business professors at the University of British Columbia and Stanford University. The tools used to negotiate a higher share price with investors often come at the expense of employees and early shareholders, sometimes drastically reducing the actual value of their stock.

The chasm between public and private valuations is a topic of increasing prominence following several disappointing listings. Among them is Blue Apron Holdings Inc., which is trading well below the price venture capitalists paid in the last fundraising round.

An often-overlooked explanation for the divide is buried in investor contracts. Blue Apron, which delivers meal kits to customers, gave stock preferences to some shareholders in 2015 in exchange for a $2 billion valuation, according to the study. A convertible loan this year included a provision that offered equity at a discount to the IPO share price, and investors took advantage of the mechanism.

The use of special investor protections has soared in recent years as startups chase dreams of becoming a unicorn. A lofty valuation can build credibility and help recruit talent in a tight labor market. But it has also complicated the already-opaque process of valuing a private business.

One provision frequently afforded to investors is called a liquidation preference. It guarantees a minimum payout in the event of an acquisition or other exit. The study found that it can exaggerate a company’s valuation by as much as 94 percent. Researchers pointed to AppNexus, a digital advertising startup. The company sold shares with a liquidation preference that guaranteed new backers at least double the amount they put in if AppNexus is acquired.

When we look at the larcenous and corrupt cultures of companies like Uber, we sometimes miss the forest for the trees.

The basic culture of the Silicon Valley startup is pump and dump.

If prosecutors ever looked at the business practices of Silicon Valley with anything near due diligence, I think that half of the company founders, and ⅔ of the venture capitalists would end up in the dock.

Of course, that’s never going to happen, because ……… Markets!