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Nobody's paid $1B for AirBnB. The investors paid a price for a % of AirBnB that equates to a valuation of $1B. In other words, they've placed a bet that AirBn
by amirmc 15y ago
Nobody's paid $1B for AirBnB. The investors paid a price for a % of AirBnB that equates to a valuation of $1B. In other words, they've placed a bet that AirBnB will be worth more than $1B.
- btilly 15y agoThis is no different than how we calculate the market cap for any company. And nobody's paid nearly $325B for Apple. But someone just bought a bit under 1 billionth of the company for about $350, so that's what the market cap works out to be.
- amirmc 15y agoI do understand what you're saying. However, the fact that AAPL shares are more liquid than AirBnB shares makes a difference to the way I think about valuations. APPL could be up or down tomorrow based on the example you just described but the same won't be true of AirBnB. If they IPO'd tomorrow, would they get a valuation of $1B? I don't know. I'm not disagreeing with the definition. I'm trying to point out that even though the maths might be the same, I see a difference between startup valuations (based on funding rounds) and market caps (shares * share-price) of listed companies.