4 ms·

Market cap is just value of a single share * number of shares outstanding. Do you have a better way of valuing a publicly-traded company? When you say "its act

by tyre 11y ago

Market cap is just value of a single share * number of shares outstanding. Do you have a better way of valuing a publicly-traded company? When you say "its actual value is probably unchanged", what value are you talking about? If you think there is a disconnect between share price and value (however you're measuring that), then it is an excellent opportunity to arbitrage an inefficient market.

sulam 11y ago
I _know_ there's a disconnect between the share price and the value, I just don't know what direction it's going to go in. This is why straddles are so much fun. :) The efficiency of markets is widely overrated.
- radicaldreamer 11y ago
  It's super annoying when there's a strong and confident initial comment and the clarifying comment is jibber jabber.
  - bcbrown 11y ago
    http://www.investopedia.com/terms/s/straddle.asp http://www.investopedia.com/terms/s/straddle.asp
    - radicaldreamer 11y ago
      Yes, I know what a straddle is, but it has almost nothing to do with the initial claim: "Its actual value is probably unchanged."
- vonklaus 11y ago
  I agree with you, and something I am actively working on. That said, anecdotally, the market seems to overvalue many things a medium amount, and greatly undervalue a small few things by an order of magnitude. So while I would say, sure, the market cap of a company, in what could pitentially br another downturn, is not exactly precision science, this company is in bad shape. Huge successful direct conpetitor: pinterest. Massive successful competitors generally like the amazon, the entire internet, and most flea markets and shops. Negative trending community; shrinking Not profitable Publicly traded. also, on a final point. Even when markets are wrong, which I dont think is the case here,they can become correct by driving the company the direction they expect it to go. So on balance, you're correct. Specifically, I wouldn't buy their stock.
curun1r 11y ago
The way I read his comment was a difference between perceived value and actual value. Market share is equivalent to perceived value, not actual value. So the comment was remarking that the drop in share price could be the result of inflated expectations becoming more realistic rather than a loss of actual value of the company. The biggest difference between perceived and actual value that I'm aware of is the tulip mania that early 1600s. In hindsight, it's pretty obvious that flowers didn't become less valuable in the short time period between the height and the collapse. Any utility or purpose they had, other than resale, was retained in its entirety. But the price difference was massive. There are many who believe we're in our own era of unicorn mania where it will become apparent, again in hindsight, that they were never as valuable as people made them out to be.
- stcredzero 11y ago
  The biggest difference between perceived and actual value that I'm aware of is the tulip mania that early 1600s. In hindsight, it's pretty obvious that flowers didn't become less valuable in the short time period between the height and the collapse. Any utility or purpose they had, other than resale, was retained in its entirety. This wouldn't apply to Bitcoin. Any utility or purpose in a bitcoin is entirely in terms of its perceived value.
- hueving 11y ago
  What are you talking about? The value to the people is what they will pay for it. If nobody is buying it at a certain price, then there is nobody that feels it has value at or above that price. There is no 'real value' of something vs its market value.
  - avalaunch 11y ago
    I think the distinction being made is the value of the stock vs the value of the company, which is not always perfectly in sync. That's why, at any given time, a stock can be undervalued or overvalued. For example, I think you'd be hard pressed to state that the value of a stock right before a company announces unexpected losses is representative of the actual value of the company. The perceived value, prior to the announcement, is too high.
jldugger 11y ago
> Do you have a better way of valuing a publicly-traded company? I do, but it involves time travel. In 1981, Shiller published "Do Stock Prices Move Too Much to be Justified by Subsequent Dividends?" ( https://www.aeaweb.org/aer/top20/71.3.421-436.pdf https://www.aeaweb.org/aer/top20/71.3.421-436.pdf ) in which he compares index prices to their ten year dividend earnings, ex post. Volatility of prices is high, but the dividend streams are not. What this suggests is that price tends to react to short term news far more strongly than dividends would suggest is reasonable. What it doesn't tell us is whether the shift in price is diverging from reality, or converging on it.

by tyre 11y ago

sulam 11y ago

I _know_ there's a disconnect between the share price and the value, I just don't know what direction it's going to go in. This is why straddles are so much fun. :) The efficiency of markets is widely overrated.

radicaldreamer 11y ago
It's super annoying when there's a strong and confident initial comment and the clarifying comment is jibber jabber.
- bcbrown 11y ago
  http://www.investopedia.com/terms/s/straddle.asp http://www.investopedia.com/terms/s/straddle.asp
  - radicaldreamer 11y ago
    Yes, I know what a straddle is, but it has almost nothing to do with the initial claim: "Its actual value is probably unchanged."
vonklaus 11y ago
I agree with you, and something I am actively working on. That said, anecdotally, the market seems to overvalue many things a medium amount, and greatly undervalue a small few things by an order of magnitude. So while I would say, sure, the market cap of a company, in what could pitentially br another downturn, is not exactly precision science, this company is in bad shape. Huge successful direct conpetitor: pinterest. Massive successful competitors generally like the amazon, the entire internet, and most flea markets and shops. Negative trending community; shrinking Not profitable Publicly traded. also, on a final point. Even when markets are wrong, which I dont think is the case here,they can become correct by driving the company the direction they expect it to go. So on balance, you're correct. Specifically, I wouldn't buy their stock.

curun1r 11y ago

The way I read his comment was a difference between perceived value and actual value. Market share is equivalent to perceived value, not actual value. So the comment was remarking that the drop in share price could be the result of inflated expectations becoming more realistic rather than a loss of actual value of the company. The biggest difference between perceived and actual value that I'm aware of is the tulip mania that early 1600s. In hindsight, it's pretty obvious that flowers didn't become less valuable in the short time period between the height and the collapse. Any utility or purpose they had, other than resale, was retained in its entirety. But the price difference was massive. There are many who believe we're in our own era of unicorn mania where it will become apparent, again in hindsight, that they were never as valuable as people made them out to be.

stcredzero 11y ago
The biggest difference between perceived and actual value that I'm aware of is the tulip mania that early 1600s. In hindsight, it's pretty obvious that flowers didn't become less valuable in the short time period between the height and the collapse. Any utility or purpose they had, other than resale, was retained in its entirety. This wouldn't apply to Bitcoin. Any utility or purpose in a bitcoin is entirely in terms of its perceived value.
hueving 11y ago
What are you talking about? The value to the people is what they will pay for it. If nobody is buying it at a certain price, then there is nobody that feels it has value at or above that price. There is no 'real value' of something vs its market value.
- avalaunch 11y ago
  I think the distinction being made is the value of the stock vs the value of the company, which is not always perfectly in sync. That's why, at any given time, a stock can be undervalued or overvalued. For example, I think you'd be hard pressed to state that the value of a stock right before a company announces unexpected losses is representative of the actual value of the company. The perceived value, prior to the announcement, is too high.

jldugger 11y ago

> Do you have a better way of valuing a publicly-traded company? I do, but it involves time travel. In 1981, Shiller published "Do Stock Prices Move Too Much to be Justified by Subsequent Dividends?" ( https://www.aeaweb.org/aer/top20/71.3.421-436.pdf https://www.aeaweb.org/aer/top20/71.3.421-436.pdf ) in which he compares index prices to their ten year dividend earnings, ex post. Volatility of prices is high, but the dividend streams are not. What this suggests is that price tends to react to short term news far more strongly than dividends would suggest is reasonable. What it doesn't tell us is whether the shift in price is diverging from reality, or converging on it.