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Market cap of $18, assets on balance sheet of $15 bn... some portion of that value may be breakup / liquidation value. In theory, a company is worth the greater
by tomkarlo 15y ago
Market cap of $18, assets on balance sheet of $15 bn... some portion of that value may be breakup / liquidation value. In theory, a company is worth the greater of its future earnings (hence P/E) or it's liquidation value. (This assumes they're rational enough to break it up if that value is greater.)
So in theory, Yahoo's earnings could go to zero, and it would still be worth $15bn because you could liquidate the assets... and the P/E would rise towards infinity.
- rphlx 15y agoWell, non-cash Assets are often valued way above the firesale price they'd fetch in a rapid liquidation. The $4B in goodwill is not easy to extract.
- tomkarlo 15y agoTrue, but they have significant investments outside of their own business that would likely hold value, plus the assets on balance sheet don't include any patents, etc. that they own and might have standalone value. I'm just saying that's why the P/E will tend to float higher than you'd expect on the comps alone when you get down to certain market caps.