Thursday, March 20, 2014

Yahoo has negative market value. Sell. Sell. Sell. So says the Market!

Just when I thought nothing nuts would hit before midnight, market valuation hit me between the eyes.

Bloomberg's

The quick and dirty:

Yahoo! has market valuation of $39 billion.

Yahoo! owns 24% of Alibaba, which has market valuation of $153 billion, so Yahoo!'s stake is worth $37 billion.

Yahoo! also owns 35% of Yahoo! Japan, a publicly traded company with valuation of $32 billion, so Yahoo!'s stake is worth $11 billion.

That is, Yahoo! control's assets worth $49 billion, before counting other start-ups and Chinese firms it owns.

And despite this $49 billion in assets, the market values Yahoo! at $39 billion.

Therefore, the efficient, all-knowing market thinks that Yahoo!'s core business is actually costing investors $10 billion dollars.

That's a study in logic or fallacy, isn't it?

Basketball team A beats team B by 10 points. Team B beat team C by 30 points. C beat D by 15 points. Therefore, if A played D, A would win by 55 points.

In the Yahoo example, no one knows the value of an enterprise until liquidation. No one knows the outcome of a basketball game until the game is played.

This is the logic of market economics.

No comments: