The alarm bells were blaring in Silicon Valley last week when digital payments processor Square Inc. (SQ) priced its IPO at $9.

That’s a 25% discount to the midpoint of the proposed $11 to $13 per share range – and a hefty 42% lower than its latest private equity funding round at $15.46 per share.

Okay, so what? The IPO missed the mark – it happens.

Well, the news had tech analysts fearing that it would set a dangerous precedent. Namely, that it would prevent more than 140 unicorn companies from going public.

What are “unicorn companies”?

Basically, they’re private tech startups with valuations north of $1 billion.

Heck, the most apocalyptic pundits went as far as suggesting that Square’s IPO flop would bring about the complete extinction of tech unicorns.

Puh-lease!

If anything, Square’s IPO pricing is a healthy development and a potential blessing for everyday investors like us, not a harbinger of some Techpocalypse.

Here’s why…

Hitting the Valuation Reset Button

As Bloomberg View’s Matt Levine points out, “valuing companies is hard.”

That’s especially true for fast-growing, early-stage technology companies.

We’ve recently seen a healthy debate rage over private market valuations for tech companies. The consensus sentiment is that companies are definitely skewed towards being overvalued.

That’s fine… but here’s the thing: An IPO is a check-and-balance in the system. It’s merely a pricing mechanism that provides an opportunity to hit the “reset” button on a company and its valuation, if necessary.

That’s clearly what happened with Square. But it’s not the only one.

I expect the trend to continue, too.

I know… I’m suggesting that a bout of rational behavior is actually going to sweep over capital markets, which is admittedly atypical. However, evidence is piling up in support of it. At least in the tech sector.