4 ms·

Where did it go?

by avalys 4y ago

Where did it go?

fasthands9 4y ago
It is possible for actual value to be destroyed or lost to other people. If you own an oil well and pay out a ton of employees to try a new extraction method which causes a fire - the actual value of your asset has been destroyed. And a lot of money has also been transferred from investors to employees. The embarrassment may also cause you to lose trust of other companies which hurts the value of future contracts. Some of the value you destroyed is gained by other companies since they can now sell their product for more - but the shareholder value of the well you own is lost. I agree Facebook's value has a speculative element to it - but its pretty clear that the money has been lost because the thing of value has been partially destroyed both by itself and by competitors like Apple and TikTok which is stealing its revenue.
freen 4y ago
It never existed. Cash value is realized upon liquidation. Before that, it’s just paper.
- fasthands9 4y ago
  Would you say that if you own 20% shares of the most popular sushi restaurant in town - and then there was a kitchen fire not covered by insurance and you accidentally poisoned a customer - no value of your investment was destroyed? Of course it was. You can debate how much of it was speculative but even in tech its not all made up.
  - thaumasiotes 4y ago
    But that's not what's being reported here. If you owned 20% of shares of the most popular sushi restaurant in town, and absolutely nothing about the restaurant changed, but its market capitalization went down, would you say that no value was destroyed? It is conventional to describe a loss of value in both cases, but the second kind is much more obviously hypothetical than the first kind.
    - fasthands9 4y ago
      A lot did change though. Apple changed settings on its tracking which made it harder for Facebook to charge a lot for ads. TikTok became bigger than people were expecting (like a rival sushi restaurant opening next door). And they spent a lot of money on the metaverse that appears so far to be a complete waste. I agree there is more speculation but overall its cash flow went down a lot and thats not that speculative.
      - altdataseller 4y ago
        And as a result of their stock plummeting, a lot more can change like loss of morale, and the top employees leaving (beyond those they are cutting)
zmmmmm 4y ago
you can equally say - where did it come from? It went back to where it came from: nowhere. Market cap is a completely made up concept in the first place.
presto8 4y ago
100 people own 1 share each of a company at $1.00 a share: 100 shares times $1.00 = $100 market cap. Then a new person wants to buy a share from one of the existing owners. The existing owner wants $1.10. Now the stock is worth $1.10 and the value of all 100 shares is $110. The person who sold their 1 share made 10 cents profit, but the remaining $9.90 of new market capitalization was created out of thin air and doesn't exist until those owners are able to sell their shares on the market.

Where did it go?

by avalys 4y ago

Where did it go?

It is possible for actual value to be destroyed or lost to other people. If you own an oil well and pay out a ton of employees to try a new extraction method which causes a fire - the actual value of your asset has been destroyed. And a lot of money has also been transferred from investors to employees. The embarrassment may also cause you to lose trust of other companies which hurts the value of future contracts. Some of the value you destroyed is gained by other companies since they can now sell their product for more - but the shareholder value of the well you own is lost. I agree Facebook's value has a speculative element to it - but its pretty clear that the money has been lost because the thing of value has been partially destroyed both by itself and by competitors like Apple and TikTok which is stealing its revenue.

freen 4y ago

It never existed. Cash value is realized upon liquidation. Before that, it’s just paper.

fasthands9 4y ago
Would you say that if you own 20% shares of the most popular sushi restaurant in town - and then there was a kitchen fire not covered by insurance and you accidentally poisoned a customer - no value of your investment was destroyed? Of course it was. You can debate how much of it was speculative but even in tech its not all made up.
- thaumasiotes 4y ago
  But that's not what's being reported here. If you owned 20% of shares of the most popular sushi restaurant in town, and absolutely nothing about the restaurant changed, but its market capitalization went down, would you say that no value was destroyed? It is conventional to describe a loss of value in both cases, but the second kind is much more obviously hypothetical than the first kind.
  - fasthands9 4y ago
    A lot did change though. Apple changed settings on its tracking which made it harder for Facebook to charge a lot for ads. TikTok became bigger than people were expecting (like a rival sushi restaurant opening next door). And they spent a lot of money on the metaverse that appears so far to be a complete waste. I agree there is more speculation but overall its cash flow went down a lot and thats not that speculative.
    - altdataseller 4y ago
      And as a result of their stock plummeting, a lot more can change like loss of morale, and the top employees leaving (beyond those they are cutting)

zmmmmm 4y ago

you can equally say - where did it come from? It went back to where it came from: nowhere. Market cap is a completely made up concept in the first place.

presto8 4y ago

100 people own 1 share each of a company at $1.00 a share: 100 shares times $1.00 = $100 market cap. Then a new person wants to buy a share from one of the existing owners. The existing owner wants $1.10. Now the stock is worth $1.10 and the value of all 100 shares is $110. The person who sold their 1 share made 10 cents profit, but the remaining $9.90 of new market capitalization was created out of thin air and doesn't exist until those owners are able to sell their shares on the market.