4 ms·

You're wrong.

by aetherson 5y ago

You're wrong.

IncRnd 5y ago
In what way am I wrong?
- JumpCrisscross 5y ago
  > company can have 100 shares, each worth $1, and be valued at $2,000,000,000 Not OP. But that company is worth $100. “Worth” is an ambiguous term, however, as it encompasses value in both par and market. One case makes you right. The other, the other.
  - IncRnd 5y ago
    A company is worth what people are willing to pay for it's shares. The share price is not the same as valuation, which can be seen in the example above. It can also be seen with what is commonly called value investing, which is used by possibly millions of people, purchasing shares where the book value is greater than the trading value.
    - JumpCrisscross 5y ago
      > company is worth what people are willing to pay for it's shares If you say a company’s shares are “worth” $1 per share, you imply that’s what people are willing to pay for it. If you’re playing with the word “worth,” it’s your incumbency to explain that deviance from the common use. Par value is a legal term. Book value is an (increasingly anachronistic) accounting term; actually, several terms, since GAAP book is separate from IASB or Chinese book, but I digress. Each of which are separate from market value, which is also various; consider a public stock: does one take the bid or the offer or the mid market tick? At Noon or the closing or a VWAP? Companies play with their headline valuation. In this you are correct. But they’re playing with the ambiguity that stumbles you.
      - deleted 5y ago
        [deleted]
      - IncRnd 5y ago
        You agreed with my comment elsewhere. Please stop with strawman restatements and arguing for the sake of arguing. > Technically, no. You can acquire control of a $100bn company for $1 if the shareholder agreement says so. Votes and dollars don’t have to correlate, particularly in Italy. [1] [1] https://news.ycombinator.com/item?id=30455219 https://news.ycombinator.com/item?id=30455219
        deleted 5y ago
        [deleted]
  - HWR_14 5y ago
    It's technically possible. You can imagine a company with exactly 100 shares, and a contract that allows the company a right to buy any share put up for sale pre-IPO for $1. Then all 100 shares are "worth" a dollar, even if the price in the market without that clause would be $20MM. That would correspond to a $2 billion valuation.
- aetherson 5y ago
  If people are willing to buy shares only at $1/share and there are 100 shares, then the company is valued at $100. It may previously have been valued at $2M! In the case of pre-public companies, where there is not a robust, liquid market in shares of the company, it can be difficult to figure out what the valuation of the company is. In that case, we often revert to the most recent time when lots of shares were sold, and what they were sold for. In the hypothetical scenario you refer to, this is a bad approximation. If a company has, for example, liquid assets worth several million dollars, no liabilities that need to be paid off, but someone is willing to sell the company for $100, then that's a dumb valuation, but it's still the valuation.

You're wrong.

IncRnd 5y ago

In what way am I wrong?

JumpCrisscross 5y ago
> company can have 100 shares, each worth $1, and be valued at $2,000,000,000 Not OP. But that company is worth $100. “Worth” is an ambiguous term, however, as it encompasses value in both par and market. One case makes you right. The other, the other.
- IncRnd 5y ago
  A company is worth what people are willing to pay for it's shares. The share price is not the same as valuation, which can be seen in the example above. It can also be seen with what is commonly called value investing, which is used by possibly millions of people, purchasing shares where the book value is greater than the trading value.
  - JumpCrisscross 5y ago
    > company is worth what people are willing to pay for it's shares If you say a company’s shares are “worth” $1 per share, you imply that’s what people are willing to pay for it. If you’re playing with the word “worth,” it’s your incumbency to explain that deviance from the common use. Par value is a legal term. Book value is an (increasingly anachronistic) accounting term; actually, several terms, since GAAP book is separate from IASB or Chinese book, but I digress. Each of which are separate from market value, which is also various; consider a public stock: does one take the bid or the offer or the mid market tick? At Noon or the closing or a VWAP? Companies play with their headline valuation. In this you are correct. But they’re playing with the ambiguity that stumbles you.
    - deleted 5y ago
      [deleted]
    - IncRnd 5y ago
      You agreed with my comment elsewhere. Please stop with strawman restatements and arguing for the sake of arguing. > Technically, no. You can acquire control of a $100bn company for $1 if the shareholder agreement says so. Votes and dollars don’t have to correlate, particularly in Italy. [1] [1] https://news.ycombinator.com/item?id=30455219 https://news.ycombinator.com/item?id=30455219
      - deleted 5y ago
        [deleted]
- HWR_14 5y ago
  It's technically possible. You can imagine a company with exactly 100 shares, and a contract that allows the company a right to buy any share put up for sale pre-IPO for $1. Then all 100 shares are "worth" a dollar, even if the price in the market without that clause would be $20MM. That would correspond to a $2 billion valuation.
aetherson 5y ago
If people are willing to buy shares only at $1/share and there are 100 shares, then the company is valued at $100. It may previously have been valued at $2M! In the case of pre-public companies, where there is not a robust, liquid market in shares of the company, it can be difficult to figure out what the valuation of the company is. In that case, we often revert to the most recent time when lots of shares were sold, and what they were sold for. In the hypothetical scenario you refer to, this is a bad approximation. If a company has, for example, liquid assets worth several million dollars, no liabilities that need to be paid off, but someone is willing to sell the company for $100, then that's a dumb valuation, but it's still the valuation.