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Your assumption is that market cap dramatically overstates the market value of companies. Your car analogy is flawed. Why not look at mergers and acquisitions?
by dereg 16y ago
Your assumption is that market cap dramatically overstates the market value of companies. Your car analogy is flawed.
Why not look at mergers and acquisitions? When companies attempt hostile takeovers, are they making bids that undercut the market's own valuations? Do people like to sell their shares at large discounts? No. Companies have to pay a hefty price premium over the existing market value.
- brc 16y agoNo, if you re-read it, I implied that the market cap could be lower or higher. The car example said that either you have more buyers than you need, or less buyers than you need. You would end up with less than, or more than $1 million dollars, but it's unlikely you'd end up with exactly that amount. Indeed an open-market acquisition is a good indicator of the value of the company - the value of anything being what someone is willing to pay for it.