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We have to value the company's assets and liabilities. The $2B market cap is a good perceived value of the company as a whole. If there's $1.5B cash on hand, th
by haikuginger 10y ago
We have to value the company's assets and liabilities. The $2B market cap is a good perceived value of the company as a whole. If there's $1.5B cash on hand, then we can value that cash at $1 per $1 of face value (it's cash, which is easy). That leaves $500M in net value that the company has not accounting for that cash on hand. If the company owns the building, and the building is worth, say $550M, then factoring that out actually puts the value of the rest of the company at negative $50M.
- vmasto 10y agoThis made it even more confusing for me.
- mattkrause 10y agoI'll sell you a piggy bank containing a $10 bill for $10.01 How much does the piggy bank actually cost? Even though you initially need to hand me $10.01, you can immediately crack it open and put the tenner back in your wallet, so the piggy bank actually only costs you a penny Now suppose the piggy bank is actually a soda bottle. Returning the bottle to the store gets you five cents, plus the ten dollar bill is still inside, so the combination is worth $10.05 when broken up, but only $10.01 when together. Thus the bottle-bank has a negative value. This might be because a bottle-bank is slimy and disgusting. Read whatever you will into this analogy :-)
- a_small_island 10y agoGoto walmart, buy a wallet. Put $1.50 inside the wallet. I will buy the wallet+cash from you for $2. How much is just the wallet worth?