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Owning a company is traditionally thought to be of value because you get a stream of dividend income from the profits the company earns, not because you can sel

Owning a company is traditionally thought to be of value because you get a stream of dividend income from the profits the company earns, not because you can sell the company.

paulmd 5y ago
what? no. assets/IP have always been highly valued and certainly not on the sole basis of their cost-to-replicate. (and if you can't sell assets, that's the only valid metric for valuation - "I need that thing and would have built it anyway". Even if it's complimentary to your existing business - the BATNA is "build it myself".) extremely controversial (if not outright incorrect) statement to be labeling as "traditional wisdom". Says who?Probably not any economics textbook written in the last century.
- anotherman554 5y ago
  You are confused or may not have been paying attention to the context of the post you replied to. We're talking about the value of a publicly traded company, Nvidia. We aren't talking about the value of the Mona Lisa, or an NFT of a dancing monkey or even a Bitcoin. I didn't write anything controversial and you don't need to consult an economics textbook, a basic Investopedia article will do: From Investopedia: https://www.investopedia.com/articles/fundamental-analysis/11/choosing-valuation-methods.asp https://www.investopedia.com/articles/fundamental-analysis/1... "The dividend discount model (DDM) is one of the most basic of the absolute valuation models. The dividend discount model calculates the "true" value of a firm based on the dividends the company pays its shareholders." An alternative model if there is no dividends: "the Discounted Cash Flow model uses a firm's discounted future cash flows to value the business. " The ability of a firm to sell itself to a foreign firm is not a factor is valuing the firm. I wouldn't use these models to value a Pikachu trading card, but this is stock market 101 type stuff.

Owning a company is traditionally thought to be of value because you get a stream of dividend income from the profits the company earns, not because you can sell the company.

paulmd 5y ago

what? no. assets/IP have always been highly valued and certainly not on the sole basis of their cost-to-replicate. (and if you can't sell assets, that's the only valid metric for valuation - "I need that thing and would have built it anyway". Even if it's complimentary to your existing business - the BATNA is "build it myself".) extremely controversial (if not outright incorrect) statement to be labeling as "traditional wisdom". Says who?Probably not any economics textbook written in the last century.

anotherman554 5y ago
You are confused or may not have been paying attention to the context of the post you replied to. We're talking about the value of a publicly traded company, Nvidia. We aren't talking about the value of the Mona Lisa, or an NFT of a dancing monkey or even a Bitcoin. I didn't write anything controversial and you don't need to consult an economics textbook, a basic Investopedia article will do: From Investopedia: https://www.investopedia.com/articles/fundamental-analysis/11/choosing-valuation-methods.asp https://www.investopedia.com/articles/fundamental-analysis/1... "The dividend discount model (DDM) is one of the most basic of the absolute valuation models. The dividend discount model calculates the "true" value of a firm based on the dividends the company pays its shareholders." An alternative model if there is no dividends: "the Discounted Cash Flow model uses a firm's discounted future cash flows to value the business. " The ability of a firm to sell itself to a foreign firm is not a factor is valuing the firm. I wouldn't use these models to value a Pikachu trading card, but this is stock market 101 type stuff.