What is Square or any startup really worth?(cnbc.com)
cnbc.com
What is Square or any startup really worth?
http://www.cnbc.com/2015/11/13/square-what-its-really-worth.html
7 comments
It is worth what someone is willing to pay for it. The correct question is: under what conditions is it worth it? Many valuations seem to rely on investor N+1 being even more gullible than investor N.
You can't defy gravity though; eventually someone is going to want to get a dividend. It must be more profitable to own shares in a firm than to not once the chain of fools has run out.
You can't defy gravity though; eventually someone is going to want to get a dividend. It must be more profitable to own shares in a firm than to not once the chain of fools has run out.
I'm confused here -- the argument is that a ratchet which is clearly going to trigger in the IPO is better for employees and other shareholders than a down round? Assuming the odds of IPO are 100%, and if we could assume the down round would be at the same price as the effective price due to ratchet, is there a difference?
I guess there might be other provisions in earlier rounds of equity which would be triggered by a down round vs ratchet in IPO, but is this mainly a distinction of optics?
I guess there might be other provisions in earlier rounds of equity which would be triggered by a down round vs ratchet in IPO, but is this mainly a distinction of optics?
Must answer question: Worth to whom?
Not every potential buyer will agree on the "worth" of X.
Ultimately X is not worth anything unless and until X is sold.
Perhaps the tense is wrong.
Not what _is_ X worth, but what _will be_ the worth of X (when X is sold).
In the end, "worth" is "price paid" (by some buyer).
Not every potential buyer will agree on the "worth" of X.
Ultimately X is not worth anything unless and until X is sold.
Perhaps the tense is wrong.
Not what _is_ X worth, but what _will be_ the worth of X (when X is sold).
In the end, "worth" is "price paid" (by some buyer).
That's true, but what I think they generally refer to is the price the market would pay (that is, the price/share where demand for a share will equal the supply).
You are correct that "X is not worth anything unless and until X is sold" - that is why they are saying that IPOs may be lower than expected for these huge valuations - because the equilibrium market price is believed to be lower than the current valuations, priced by a small market of investors. According to the efficient market hypothesis stocks on the stock market will trade at their fair value (that's pretty disputed, but a good amount of respected people agree with it).
You are correct that "X is not worth anything unless and until X is sold" - that is why they are saying that IPOs may be lower than expected for these huge valuations - because the equilibrium market price is believed to be lower than the current valuations, priced by a small market of investors. According to the efficient market hypothesis stocks on the stock market will trade at their fair value (that's pretty disputed, but a good amount of respected people agree with it).
Whatever it is acquired for. ;)
Url changed from https://recode.net/2015/11/13/how-startups-ratchet-up-their-..., which points to this.
It makes sense because of the necessity of these companies to raise capital, but it also has a somewhat ironic tinge.