Insane Value of Companies
How much is a company worth? For a company listed on the stock exchange, that’s easy. Multiply the total number of shares with the price of a single share and you get the value of the company (as seen by the market). But sometimes, the numbers just don’t add up. Like Matthew Klein showed about Yahoo! in March this year . Yahoo! was valued at $39 billion by the stock market. It owned 24% of Alibaba that in turn was valued at $153 billion. 24% of $153 billion is $37 billion. Did that mean Yahoo!’s own businesses were only worth $2 billion? But wait, it gets even more insane. Yahoo also has a 35% stake in Yahoo Japan, which was then valued at $32 billion. 35% of $32 billion is $11 billion. That meant Yahoo!’s intrinsic worth was…negative!! And you thought Wall Street guys were smart! Stock markets like to value companies in the same industry (somewhat) similarly. Like all steel companies. Or all airline companies. Then the tech companies complicated that system. Like Apple (both...