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Not exactly. All these “market cap” exercises just take whatever the last trade happened to be, for some relatively small number of shares, and then multiply i
by Nifty3929 3y ago
Not exactly.
All these “market cap” exercises just take whatever the last trade happened to be, for some relatively small number of shares, and then multiply it by the total number of shares.
This is an okay, but far from perfect, way to value a company.
This is why when a company is purchased in entirety, it’s often at a large premium or discount to the market cap.
Is Nvidia really worth about 1T? Maybe, likely not though.
I think most people would rather have one third of Apple than all of Nvidia.
- osti 3y agoA lot of people will rather own a third of Apple, but the market, thus by extension, most people who actually invest, think that Nvidia is worth a third of Apple, on last Friday at least.
- Nifty3929 3y agoNo, that is not at all what it means - that’s my point. All of Nvidia was not purchased in Friday, and neither was 1/3 if Apple. We don’t really know what those things are worth, because we do not have such a transaction. To base that on. All we know is what a bunch of individuals would buy or sell a small number of shares for. Very different.
- suddenclarity 3y agoI think it's a lost cause. People don't want to understand. It would shatter their worldview on both net worth of the rich (you can't tax imaginary money) and their own net worth.
- osti 3y agoMarket value is a basis for most modern accounting and finance theory, so there isn't anything outrageous about it, otherwise people would have changed how finance is taught long ago.
- Nifty3929 3y agoMarket cap isn’t a bad measurement per se, it just doesn’t mean what people think it means sometimes. Or they use it wrong.
- Nifty3929 3y ago+1 on the net worth thing too…
- osti 3y agoBut fact is, there are many cases where one investor tries to buy the whole company, the investor has to pay a premium over what the market currently values it at (Musk buying Twitter for example). So the current market price is a good approximation for what its real value is. Unless you think you know better than what our modern finance theory says, then I don't think your point is valid at all.