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!

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.