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Can someone help me understand this from an investment perspective? AOL and Yahoo were worth a combined $400 billion in the 90s. Was investing in either of thos

Can someone help me understand this from an investment perspective? AOL and Yahoo were worth a combined $400 billion in the 90s. Was investing in either of those companies essentially a fail? Were all those investors wrong or did they somehow recoup their investment through dividends and such over the last 25 years to justify that market cap? Currently the market is telling me that Facebook is a $900+ billion company. Will investors ever get $900 billion back?

christophilus 5y ago
Holding those names was an investment failure, as was holding the majority of tech names at that point in history. Trading those names, on the other hand could be lucrative. A friend of mine paid cash for his college education and his car by playing Hand, the maker of palm pilots.
- reiichiroh 5y ago
  Handspring?
  - meepmorp 5y ago
    Presumably. I miss my Visor, tbh.
kumarvvr 5y ago
The stockmarket is like a round robin thingy, putting it lightly. All those who hold shares in FB, combined, are holding paper that is worth 900B. However, if even 10% of those wanted to sell their holdings at a time, the price would fall and the total holdings would be worth less for all. Now, why are they holding the shares then? Two things come into play. Firstly, say 5 years down the line, the holders have confidence that FB will still be making money, be profitable and be on the market. Secondly, that five years down the line, there is someone else who is willing to pay for the shares at a premium of what they have originally purchased for. Now what about those who are buying 5 years down the line? They too must have confidence on FB that a further 5 years or more down the line, FB will be profitable and will be in the market and keep earning money. And so on and so forth. So is FB really worth 900B, yes, if the holders keep holding it and FB keeps earning profits. Can everyone get their worth from the shares? Not at once. Not in a hurry.
- deleted 5y ago
  [deleted]
- bredren 5y ago
  For highly valued tech stocks I’d add that there is some presumption that these companies will acquire or build their way into major new sources of revenue that throw off vast profits. With tech this might be implicit if they are “profitable and still in the market.” But it is different than say John Deer or Miller Paint in that regard.
- blihp 5y ago
  In other words, the greater fool theory.
  - berkes 5y ago
    Not really. The crucial piece is the future profit.
    - blihp 5y ago
      Right, but notice that wasn't the emphasis of the post I was responding to. OK, there was 1/2 a sentence that touched on profits as almost an afterthought. The thing that sets me off about these threads is the (I believe sincere) thinking that 'well if that's the share price, it must be worth that much'. That's fine if you're speculating/trading but is absolutely wrong if you think what you're doing is investing.
      - nl 5y ago
        > OK, there was 1/2 a sentence that touched on profits as almost an afterthought. Are we reading different posts? The post you responded to repeatedly made the point that profits are one of the key builders of market confidence: >> Firstly, say 5 years down the line, the holders have confidence that FB will still be making money, be profitable and be on the market. ... >> They too must have confidence on FB that a further 5 years or more down the line, FB will be profitable and will be in the market and keep earning money. ... >> So is FB really worth 900B, yes, if the holders keep holding it and FB keeps earning profits. It's a key point of their argument!
u678u 5y ago
If people stop using Facebook products yes the investors will lose 900,000,000,000 dollars.

christophilus 5y ago

Holding those names was an investment failure, as was holding the majority of tech names at that point in history. Trading those names, on the other hand could be lucrative. A friend of mine paid cash for his college education and his car by playing Hand, the maker of palm pilots.

reiichiroh 5y ago
Handspring?
- meepmorp 5y ago
  Presumably. I miss my Visor, tbh.

kumarvvr 5y ago

The stockmarket is like a round robin thingy, putting it lightly. All those who hold shares in FB, combined, are holding paper that is worth 900B. However, if even 10% of those wanted to sell their holdings at a time, the price would fall and the total holdings would be worth less for all. Now, why are they holding the shares then? Two things come into play. Firstly, say 5 years down the line, the holders have confidence that FB will still be making money, be profitable and be on the market. Secondly, that five years down the line, there is someone else who is willing to pay for the shares at a premium of what they have originally purchased for. Now what about those who are buying 5 years down the line? They too must have confidence on FB that a further 5 years or more down the line, FB will be profitable and will be in the market and keep earning money. And so on and so forth. So is FB really worth 900B, yes, if the holders keep holding it and FB keeps earning profits. Can everyone get their worth from the shares? Not at once. Not in a hurry.

deleted 5y ago
[deleted]
bredren 5y ago
For highly valued tech stocks I’d add that there is some presumption that these companies will acquire or build their way into major new sources of revenue that throw off vast profits. With tech this might be implicit if they are “profitable and still in the market.” But it is different than say John Deer or Miller Paint in that regard.
blihp 5y ago
In other words, the greater fool theory.
- berkes 5y ago
  Not really. The crucial piece is the future profit.
  - blihp 5y ago
    Right, but notice that wasn't the emphasis of the post I was responding to. OK, there was 1/2 a sentence that touched on profits as almost an afterthought. The thing that sets me off about these threads is the (I believe sincere) thinking that 'well if that's the share price, it must be worth that much'. That's fine if you're speculating/trading but is absolutely wrong if you think what you're doing is investing.
    - nl 5y ago
      > OK, there was 1/2 a sentence that touched on profits as almost an afterthought. Are we reading different posts? The post you responded to repeatedly made the point that profits are one of the key builders of market confidence: >> Firstly, say 5 years down the line, the holders have confidence that FB will still be making money, be profitable and be on the market. ... >> They too must have confidence on FB that a further 5 years or more down the line, FB will be profitable and will be in the market and keep earning money. ... >> So is FB really worth 900B, yes, if the holders keep holding it and FB keeps earning profits. It's a key point of their argument!

u678u 5y ago

If people stop using Facebook products yes the investors will lose 900,000,000,000 dollars.