Does Apple prove that the stock market can be a total joke?

Quote from ChkitOut:

i think u need to go back to finance 101. you're obviously confused as to what market value is or means.

the current price x shares outstanding IS the current market value, i dont really know what the hell you're talking about when you say price is not value or whatever... again, if i wanted to buy apple, i couldnt do it for less than 400 billion. the current market value. share price x shares outstanding.
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No, that is the market capitalization. That is not what the company's true value is. A company's market cap can be substantially higher or lower then it's real value. Sure, if you wanted to buy 100 shares of AAPL "stock" you could pay the offer. But if someone wanted to actually buy the company, I assure you they would not pay the current stock price. They might pay more or less, in some cases substantially more or less. Why do you think some stocks pop 100% the next day after it is announced firm XYZ is buying out firm ABC for a 100% premium? Or why do you think you a firm might actually pay LESS for a stock then it's current price? It's because the buyer feels the company is worth much more or much less then where it's stock is trading on that "particular" day. Buyouts can take months or years to put together. The price is decided well in advance. Where the stock "happens" to be trading at on the particular day of the news is irrelevant.

For example, when JP Morgan bought out shares of Bear Stearns during the financial crisis, BSC was trading at $30 a share on Friday at the close (your market price). On Monday it was announced that JP would buy them out for $2 a share!!!!! They ultimately raised the price under shareholder pressure to $10. But obviously they did not pay the market price of $30. In most cases, stocks are bought at a premium to current share price. Again, companies are "usually" bought out because the buyer thinks the company is "worth" more then it's current "stock price". Market capitalization is meaningless.

On the flip side, when Warren Buffet bought out Burlington Northern last year, he paid a 30% "premium" to the closing stock price the day before the announcement. Why did he do that? Because he thinks the company is worth far more then it's current market capitalization.
 
Quote from Maverick74:

They might pay more or less, in some cases substantially more or less
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im not going to get into the bear story. it was a complicated situation orchestrated by the fed. it doesn't apply here.

no shareholder would accept a lower offer from a buyer than the current market price. why would they, they would be throwing money away. it doesn't happen. which is why its always at a premium, because the buyer is paying for potential future growth and earnings and has to entice the major shareholders to go along with the deal.

market cap IS the starting point, the basis on which any buyer will base how much premium past that value they want to offer.
 
if a buyout firm approached apple about a few months ago when market cap was 700 billion and offered to take the company private for 500 billion, it could not and would not ever happen because no shareholder would approve that deal.

now, on the other hand, yes it could happen.

so the point is, market cap means everything.
 
Quote from ChkitOut:

im not going to get into the bear story. it was a complicated situation orchestrated by the fed. it doesn't apply here.

no shareholder would accept a lower offer from a buyer than the current market price. why would they, they would be throwing money away. it doesn't happen. which is why its always at a premium, because the buyer is paying for potential future growth and earnings and has to entice the major shareholders to go along with the deal.

market cap IS the starting point, the basis on which any buyer will base how much premium past that value they want to offer.
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Excuses. You contradict your own statements. First you say companies are bought out at current stock prices, your entire basis for your "why is apple so cheap" argument. Then you state companies are almost always bought out for a premium, which most of us already know. Which makes your "what is apple worth" comment pointless.

The closest thing you can get to manufacturing a "value" for a company is the enterprise value. Which takes the market cap minus the cash on hand plus the long term debt. This gives you an "idea" of what you are really paying. So regardless of how you look at it, the current stock price is meaningless.
 
The numbers are what they are. Maybe your interpretation of them is a joke.

Quote from ChkitOut:

The peak of apples market cap was 700 billion and it has since lost about 250 billion in market value in just a few short months.

to put this into perspective it would be equivalent to wiping out google or microsoft completely in 4 months. Think about that.. Apple could "theoretically" have owned microsoft just 4 or 5 months ago.

a little silly isnt it?
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Quote from Maverick74:

Excuses. You contradict your own statements. First you say companies are bought out at current stock prices, your entire basis for your "why is apple so cheap" argument. Then you state companies are almost always bought out for a premium, which most of us already know. Which makes your "what is apple worth" comment pointless.

The closest thing you can get to manufacturing a "value" for a company is the enterprise value. Which takes the market cap minus the cash on hand plus the long term debt. This gives you an "idea" of what you are really paying. So regardless of how you look at it, the current stock price is meaningless.
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it sounds like what you're saying is stock trading on the secondary market is just some kind of gimmicky game that means nothing. like its not tied to any reality.

my point is, if i own 1 share of apple, then guess what, i own a piece of the company. thats not fake, its real, i really do own apple. and i can also sell apple at the current market price, which also happens to be real and not some kind of phony fairly tale.

so i just dont get what you're trying to tell me exactly. :confused:

current stock price (market cap) is the ONLY reality there is. if some firm comes along and offers a 30% premium then thats great, but that is not a reality that is a fairy tale fantasy that is only in my dreams right now as owner of the company. the ONLY thing that is real is the current market cap.

you say market cap is not the "true value" not only is it the true value, its the ONLY value right now because nobody has offered me anything above that.
 
Quote from ChkitOut:

it sounds like what you're saying is stock trading on the secondary market is just some kind of gimmicky game that means nothing. like its not tied to any reality.

my point is, if i own 1 share of apple, then guess what, i own a piece of the company. thats not fake, its real, i really do own apple. and i can also sell apple at the current market price, which also happens to be real and not some kind of phony fairly tale.

so i just dont get what you're trying to tell me exactly. :confused:

current stock price (market cap) is the ONLY reality there is. if some firm comes along and offers a 30% premium then thats great, but that is not a reality that is a fairy tale fantasy that is only in my dreams right now as owner of the company. the ONLY thing that is real is the current market cap.

you say market cap is not the "true value" not only is it the true value, its the ONLY value right now because nobody has offered me anything above that.
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Oh good lord dude, go to business school. This is taught ad nausem there. Your argument is all over the map. How the f*ck do you think people value privately held companies? Which a Ouija board? LOL.
 
Quote from Maverick74:

Oh good lord dude, go to business school. This is taught ad nausem there. Your argument is all over the map. How the f*ck do you think people value privately held companies? Which a Ouija board? LOL.
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there are probably 100 different ways to 'value' a company.

you said market cap is not the 'real' or 'true' value.

lol, do you think some freaking ratio out of text book is the 'real' or 'true' value of a company.

what im saying to you is that market cap takes every god damn single piece of information on the planet and millions of freaking market participants are agreeing on a VALUE of a company, that YOU are telling me is NOT real.

again, WHAT THE FUDGE ARE YOU TALKING ABOUT! :p

private companys are not traded on public exchanges so YES, you have to use some other methods to VALUE the stinking company.

damn it please tell me you get it..
 
Quote from ChkitOut:

there are probably 100 different ways to 'value' a company.

you said market cap is not the 'real' or 'true' value.

lol, do you think some freaking ratio out of text book is the 'real' or 'true' value of a company.

what im saying to you is that market cap takes every god damn single piece of information on the planet and millions of freaking market participants are agreeing on a VALUE of a company, that YOU are telling me is NOT real.

again, WHAT THE FUDGE ARE YOU TALKING ABOUT! :p

private companys are not traded on public exchanges so YES, you have to use some other methods to VALUE the stinking company.

damn it please tell me you get it..
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Wrong. Millions of participants are agreeing on stock price. A company's stock is valued much different then the actual company. At least I finally got you to admit that that it's "stock" price is "forward looking" so by default you acknowledge that it's current stock price is NOT what the company is worth today since all your "market participants" are taking every "god damn single piece of information" and predicting the "future" value of the stock, not the current value. Oy vey.

I stated market cap is not what a company is "worth". A company maybe worth much more or less then it's current stock price. A stock price, as I stated earlier, is what someone is willing to pay for that value, not the value itself. This is explicitly why I stated when a transaction happens, two people agree on PRICE and disagree on VALUE!
 
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