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I get it that this is about profit. But to be fair, you have to factor in the valuation of the company to see if something was gained or lost in all those years

I get it that this is about profit. But to be fair, you have to factor in the valuation of the company to see if something was gained or lost in all those years.

koonsolo 4y ago
Did I say something stupid because of the downvotes? If a company chooses to reinvest the profit into the company, and therefore increases the valuation, it can be a gain, right? In that case no profit is made. If you have $1 loss and gain $3 valuation, that's a gain of $2, right?
- s1artibartfast 4y ago
  From an owner/investor perspective, you are correct. From the perspective of the corporate entity, you don't count valuation as profit/loss. For example, Twitter didn't make 44B revenue this year on the sale and you won't see it on their budget. Stock holders made that money. Same will be true again if Elon sells it for a profit or loss.
  - koonsolo 4y ago
    True, but when the corporate entity makes revenue, you basically decide to either keep it as a profit, or reinvest into the company itself. You would assume that reinvesting means the company is growing and so is worth more. I get it that shares changing hands doesn't really change anything.
    - s1artibartfast 4y ago
      I think that is a faulty assumption, and maybe that is what you got some down votes. A loss doesn't always mean reinvestment. Reinvestment doesn't always translate to growth. Growth doesn't always Translate to profitability or market value. It is staggeringly common that businesses fail despite investment and despite growth. Sometimes the product is bad or simply has limited scalability. Valuations can change rapidly based on expectations of future profit and market conditions. This is especially true in Tech and new companies where valuation is based on future potential and not current profitability. The general idea is that even if you do a lot of reinvesting and grow your market cap significantly, that market cap can evaporate if it seems unlikely that a company will actually turn into the cash machine people hoped that it would.

I get it that this is about profit. But to be fair, you have to factor in the valuation of the company to see if something was gained or lost in all those years.

koonsolo 4y ago

Did I say something stupid because of the downvotes? If a company chooses to reinvest the profit into the company, and therefore increases the valuation, it can be a gain, right? In that case no profit is made. If you have $1 loss and gain $3 valuation, that's a gain of $2, right?

s1artibartfast 4y ago
From an owner/investor perspective, you are correct. From the perspective of the corporate entity, you don't count valuation as profit/loss. For example, Twitter didn't make 44B revenue this year on the sale and you won't see it on their budget. Stock holders made that money. Same will be true again if Elon sells it for a profit or loss.
- koonsolo 4y ago
  True, but when the corporate entity makes revenue, you basically decide to either keep it as a profit, or reinvest into the company itself. You would assume that reinvesting means the company is growing and so is worth more. I get it that shares changing hands doesn't really change anything.
  - s1artibartfast 4y ago
    I think that is a faulty assumption, and maybe that is what you got some down votes. A loss doesn't always mean reinvestment. Reinvestment doesn't always translate to growth. Growth doesn't always Translate to profitability or market value. It is staggeringly common that businesses fail despite investment and despite growth. Sometimes the product is bad or simply has limited scalability. Valuations can change rapidly based on expectations of future profit and market conditions. This is especially true in Tech and new companies where valuation is based on future potential and not current profitability. The general idea is that even if you do a lot of reinvesting and grow your market cap significantly, that market cap can evaporate if it seems unlikely that a company will actually turn into the cash machine people hoped that it would.