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Valuations of public companies are decided by a small number of parties. Those parties can decide the valuation is whatever they want it to be. As long as the u
by takinola 3y ago
Valuations of public companies are decided by a small number of parties. Those parties can decide the valuation is whatever they want it to be. As long as the underlying economics of the business are not obscured, there is no fraud being perpetrated.
If it helps you can think of this as a transaction where the investor is providing a service of buying the startup more time to build up their valuation and in return obtains shares for a discounted rate.
- Paul-Craft 3y agoBut, the underlying economics are being obscured if I'm someone interested in buying shares of the company you say is worth $X but everyone else says is only worth $X/2.
- gloryjulio 3y agoBasically yes. Whatever it takes to hold up the value before dumping into the public
- takinola 3y agoNot really. Imagine you want to buy my car. I give you the make, model and let you test drive it. I also tell you that I paid $X for it and so I’m selling it at some related price F(x). At this point you have all the information to make an independent valuation. You may or may not be influenced by my view of the valuation but that’s on you to decide if you will pay what I’m asking or not.
- Paul-Craft 3y agoSorry, but cars are not companies. This doesn't apply even if it was correct.