3 ms·

That's the same with many markets though. Market cap is a pretty silly metric to use for almost any market.

by swader999 5y ago

habitue 5y ago
It's a useful metric in one particular case, which is if you're looking to buy out the stock
- swader999 5y ago
  It depends on the stock and what each individual holder is prepared to sell for. So it's exactly the same. In a corporate buyout the individual sellers typically agree on a sale price, but that's a contract on top of the market. Without that in play you'd be subject to the same unknowns and market cap wouldn't guarantee any buyout price. Hostile takeover is one example.
- deleted 5y ago
  [deleted]
mminer237 5y ago
For stocks though the market cap is judged against earnings typically. The price can never get too low or the shareholders can just force a dividend to make the money directly from the underlying equity.
bduerst 5y ago
Market cap for publicly traded corporations is still a good measure of value since there are laws, regulations, public disclosures, etc. ensuring they're equally measured to a degree. If I paid $50000 for a cowry shell and said the market cap of cowry shells is more than MasterCard then there's a few problems...
dragontamer 5y ago
The stock market won't collapse in the same way because stocks have earnings and dividends (which is what the value is largely based upon). Sure: securities can go up, or down, in price almost arbitrarily. But they largely can't go below zero (aka: bankruptcy law protects against that), and they can't really go below the expected profits of the company (because shareholders are entitled to those profits. Worst-comes-to-worst, the shareholders can demand dividends and cash out through those means) A lot of companies are 20x or 30x, or more of their expected profits (representing maybe 20 years of profits is roughly the fair price for a typical company's stock price). There are exceptions, especially in growth stage companies (where "profits" is now "expected profits" of the far future: the shareholders believe the company is onto a good idea and are willing to pay more on the hopes that the company becomes very large in the future).
- octodog 5y ago
  Invidiual stocks collapse all the time. Selling down large positions is a real problem that institutional investors face and they plan for a haircut on the list price when doing so.
  - dragontamer 5y ago
    Sure, but the stock collapses are always correlated to income issues Either expectations of future income, or present circumstances.
    - swader999 5y ago
      The stock market can be priced in BTC and I think this maybe shows that a currency and a stock contract for ownership are fundamentally different. You can't put your money to work in a currency, you just speculate that it might rise in value and have higher conversion rates in the future. Stocks are also used like a currency in mergers which seems odd but is practical in some circumstances. Stocks and currency can both become most valuable as TP or wall paper. The wilds swings in exchange rate is typical of any new currency, even the USD in its early years.
      - dragontamer 5y ago
        > The stock market can be priced in BTC Did the stock market value drop by 50% in the past couple of weeks? Because BTC has doubled. If you're saying "BTC's price is the fundamental measure" of our economy, then it means we're in a horribly deflationary spiral right now. ------- Alternatively, it means that BTC is in a bubble and maybe we can't price things in terms of BTC, because BTC is a horribly volatile asset that almost has no rhyme or reason behind its price movements.
- TylerE 5y ago
  Very few stocks actually pay dividends.
  - 5y ago

That's the same with many markets though. Market cap is a pretty silly metric to use for almost any market.

habitue 5y ago

It's a useful metric in one particular case, which is if you're looking to buy out the stock

swader999 5y ago
It depends on the stock and what each individual holder is prepared to sell for. So it's exactly the same. In a corporate buyout the individual sellers typically agree on a sale price, but that's a contract on top of the market. Without that in play you'd be subject to the same unknowns and market cap wouldn't guarantee any buyout price. Hostile takeover is one example.
deleted 5y ago
[deleted]

mminer237 5y ago

For stocks though the market cap is judged against earnings typically. The price can never get too low or the shareholders can just force a dividend to make the money directly from the underlying equity.

bduerst 5y ago

Market cap for publicly traded corporations is still a good measure of value since there are laws, regulations, public disclosures, etc. ensuring they're equally measured to a degree. If I paid $50000 for a cowry shell and said the market cap of cowry shells is more than MasterCard then there's a few problems...

dragontamer 5y ago

The stock market won't collapse in the same way because stocks have earnings and dividends (which is what the value is largely based upon). Sure: securities can go up, or down, in price almost arbitrarily. But they largely can't go below zero (aka: bankruptcy law protects against that), and they can't really go below the expected profits of the company (because shareholders are entitled to those profits. Worst-comes-to-worst, the shareholders can demand dividends and cash out through those means) A lot of companies are 20x or 30x, or more of their expected profits (representing maybe 20 years of profits is roughly the fair price for a typical company's stock price). There are exceptions, especially in growth stage companies (where "profits" is now "expected profits" of the far future: the shareholders believe the company is onto a good idea and are willing to pay more on the hopes that the company becomes very large in the future).

octodog 5y ago
Invidiual stocks collapse all the time. Selling down large positions is a real problem that institutional investors face and they plan for a haircut on the list price when doing so.
- dragontamer 5y ago
  Sure, but the stock collapses are always correlated to income issues Either expectations of future income, or present circumstances.
  - swader999 5y ago
    The stock market can be priced in BTC and I think this maybe shows that a currency and a stock contract for ownership are fundamentally different. You can't put your money to work in a currency, you just speculate that it might rise in value and have higher conversion rates in the future. Stocks are also used like a currency in mergers which seems odd but is practical in some circumstances. Stocks and currency can both become most valuable as TP or wall paper. The wilds swings in exchange rate is typical of any new currency, even the USD in its early years.
    - dragontamer 5y ago
      > The stock market can be priced in BTC Did the stock market value drop by 50% in the past couple of weeks? Because BTC has doubled. If you're saying "BTC's price is the fundamental measure" of our economy, then it means we're in a horribly deflationary spiral right now. ------- Alternatively, it means that BTC is in a bubble and maybe we can't price things in terms of BTC, because BTC is a horribly volatile asset that almost has no rhyme or reason behind its price movements.
TylerE 5y ago
Very few stocks actually pay dividends.
- 5y ago