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Valuation lower than assets means you get eaten by corporate raiders, unless you're as big as Ford or the majority of the stock is held by a single family. That

Valuation lower than assets means you get eaten by corporate raiders, unless you're as big as Ford or the majority of the stock is held by a single family. That just shows how unhealthy Ford is.

siavash 14y ago
Could you please elaborate on this?
- Lexarius 14y ago
  Suppose that someone is able to buy up enough of your stock to essentially own your company, and they notice that the cost of doing so is less than the value of all of the things your company owns. Someone could make a profit by buying your company and then butchering it, keeping a few prime cuts for itself and selling off the rest. This doesn't happen if the raiding company can't put together enough money to make the purchase, or if not enough of the stock holders are willing to part with their shares.
- nandemo 14y ago
  Lexarius' answer is great, but if you want to read more about it just look up "corporate raid[ing]" or "leveraged buyout", e.g.: http://en.wikipedia.org/wiki/Corporate_raid http://en.wikipedia.org/wiki/Corporate_raid
photon137 14y ago
You mean equity valuation lower than book value of equity. Assets don't come into the picture at all.
natnat 14y ago
That's not true. Ford is more than $100 billion in debt. If a corporate raider were to take over Ford, they would be saddled with a ton of debt too, making such a takeover a much less attractive option.
- rabidsnail 14y ago
  I didn't say that Ford is going to get raided. In fact I said that it isn't, because there isn't anybody big enough to do it. Although there probably is some way to siphon off the assets and default on the debt without committing fraud.
  - photon137 14y ago
    Yes, there is :). Take equity control of the company (which should be cheap enough for a badly-doing company) - now you'd have control over the financing decisions of the company. Issue "junior" debt uncollateralized by the company's assets. Use the cash so raised to buy off "senior"/"secured" debt outstanding in the market. When the company goes into bankruptcy, you get the first cut on the assets :). PS: Actually it's not so simple - when the company is highly leveraged, existing bondholders often do have a say in future financing decisions of the company.

Valuation lower than assets means you get eaten by corporate raiders, unless you're as big as Ford or the majority of the stock is held by a single family. That just shows how unhealthy Ford is.

siavash 14y ago

Could you please elaborate on this?

Lexarius 14y ago
Suppose that someone is able to buy up enough of your stock to essentially own your company, and they notice that the cost of doing so is less than the value of all of the things your company owns. Someone could make a profit by buying your company and then butchering it, keeping a few prime cuts for itself and selling off the rest. This doesn't happen if the raiding company can't put together enough money to make the purchase, or if not enough of the stock holders are willing to part with their shares.
nandemo 14y ago
Lexarius' answer is great, but if you want to read more about it just look up "corporate raid[ing]" or "leveraged buyout", e.g.: http://en.wikipedia.org/wiki/Corporate_raid http://en.wikipedia.org/wiki/Corporate_raid

photon137 14y ago

You mean equity valuation lower than book value of equity. Assets don't come into the picture at all.

natnat 14y ago

That's not true. Ford is more than $100 billion in debt. If a corporate raider were to take over Ford, they would be saddled with a ton of debt too, making such a takeover a much less attractive option.

rabidsnail 14y ago
I didn't say that Ford is going to get raided. In fact I said that it isn't, because there isn't anybody big enough to do it. Although there probably is some way to siphon off the assets and default on the debt without committing fraud.
- photon137 14y ago
  Yes, there is :). Take equity control of the company (which should be cheap enough for a badly-doing company) - now you'd have control over the financing decisions of the company. Issue "junior" debt uncollateralized by the company's assets. Use the cash so raised to buy off "senior"/"secured" debt outstanding in the market. When the company goes into bankruptcy, you get the first cut on the assets :). PS: Actually it's not so simple - when the company is highly leveraged, existing bondholders often do have a say in future financing decisions of the company.