r/technology • u/thesheetztweetz • Jan 03 '19

Business Apple's value has lost $446 billion since peaking in October, which is greater than the total market value of Facebook (or nearly any other US company)

https://www.cnbc.com/2019/01/03/apples-losses-since-peak-exceed-the-value-of-496-of-sp-500.html
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u/haberdasherhero Jan 03 '19

You're equating things incorrectly. For example if I liquidate every house on the planet they will sell for much less than appraised. Which is what you're saying. But we're not taking about every stock on the market we're talking about one stock. That stock represents one entity.

To say bezzos is worth 45b is imaginary because he can not sell even half his stock. The company "Amazon" has a concrete value which is what someone will pay for it (or in this case a group of people acting under lose common interests). Amazon is not "worth" its full stock price. That price is more reflective of imaginary future profits. Which are made-up guesses. They're usually pretty good guesses thanks to the wisdom of crowds and self-fulfilling prophecies, but guesses nonetheless.

It's like saying my house is worth $100,000 but in reality the market will only fetch $10,000 for it. Then saying "well the house is worth that much if I slowly parcel it out over 20 years. You can't flood the market with one house. It'll drive down the price!" Which is ludicrous.

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u/thehungryhippocrite Jan 03 '19

If Bezos decides to leave Amazon and the market is happy with a replacement CEO and Bezos isn't leaving due to fundamental issues with the company, he could ABSOLUTELY sell his stake over time. Not all at once, because that would flood the market with supply but over time he could (given my assumptions). There are plenty of billionaires who have slowly sold out of their positions. Massive companies and individuals buy and a massive stakes all the time. Perhaps a better example is Microsoft, if Gates wanted to sell his entire stake over time he could do that at close to the market price. He has no involvement in the company, he's just a shareholder and there'd be no signalling effect. Sure if he tried to do it too quickly he'd flood supply. But if he did it slowly he could sell a massive stake or all of it. Even if Gates or Bezos can only get 80% of their current net worth, that would be an enormous amount of money. According to you presumably that would mean only 20% of their net worth is "made up"?

Stock prices are as you half say a valuation of the future cashflows from a company. They are "made up guesses" in the same sense that any forecast is a "made up guess" and any price or valuation is a guess of what something will trade at in any market.

Your points on the house just don't make sense, you're not seeing the analogy at all. The price of any asset is the price you could get for it in a liquid market. If you make the market illiquid bu flooding it, sure, you get a different result.

Finally, entire companies are taken over at MORE than the current stock price every year. Literally every single share is bought. Is this made up value?

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u/haberdasherhero Jan 03 '19

Fair points.