| Will Walker | Monday, November 4, 2019 - 06:03 pm 
Can someone explain this measure to me?
It's clearly not book value. E.g. I have three services corporations with market values of 24.9B, but 61B in assets, 30-40B in cash, and no debt... so the 'market' value is less than a quarter of the actual money you'd receive for closing the corporation down...
It's clearly not the market valuation of a stock price. These same companies aren't publicly traded so they don't have a per share price that results from ask/bid matching.
It's clearly not profit-based. I have corporations with valuations in the hundreds of billions that have NEVER shown a profit, not even once, in their entire lives.
So what the hell is it measuring? And why do we think that it's a reasonable determinant of what someone who wanted to snipe my corporation should pay? Especially when book value grossly exceeds "market value?" |
| Daniel Iceling | Monday, November 4, 2019 - 09:02 pm
Will Walker,
There are a whole range of factors. I think only GM's know the exact mathematics behind it. There are several factor that play into it. And possible reasons for what you are seeing.
The valuation changes slowly. Representing how the Corporation has been doing over a long period of time. Not just the most recent 3 days in the history charts. This is why Corporations that have shown losses can sometimes have high valuations, or Corporations that have just started making profits will still have low valuations.
The biggest factor is profit over the long term. Other factors include cash on hand, materials stored in the Corporation, and a base value to make sure that the value doesn't reach zero, even when the Corp loses money.
Profits are measured after tax, not before tax. So Corporations in countries with high tax rates, will have much lower valuations. For maximum valuation, you can set your Corporate Tax rate to 0%.
Valuations start low when a corporation is new. I'm guessing that your three services Corps are new. Because even if they were losing money. It's almost impossible for a Corporation to have a valuation that low, once it's established.
PS. All of this information is for fully State or Private Corporations. Corporations traded publicly on the stock market have their value determined by supply and demand for their shares.
Signed President of DanNation on LU |
| John Galt | Monday, November 4, 2019 - 09:09 pm
I think a corp should never be valued less than the sum of its assets though. It seems strange. I have bought corps for chump change on share market just for the 100 billion in cash they are holding. |
| Daniel Iceling | Monday, November 4, 2019 - 09:17 pm
John Galt,
Yeah, share market valuations get wonky when a Corp loses money for a long period of time. Because they have no base valuation. So they can end up being basically free. Fortunately, that is only a problem for publicly traded corporations.
Signed President of DanNation on LU |
| John Galt | Monday, November 4, 2019 - 09:20 pm
Yah. There should be a floor to what a corp can be valued at, and it should be the sum of its assets minus its debts. |
| Will Walker | Monday, November 4, 2019 - 09:22 pm
The transaction JG is describing is exactly the kind I'm concerned about being the victim of, and am curious if I'll get flagged for exploiting a bug if I engage in.
It makes sense that a history of profit should be reflected in the price of corporation: after all, the more secure the returns the lower they can be. And since you don't have a choice to say "no, I won't sell this corporation," then it makes sense to have the system do something automatically in that regard.
But for any corporation to be for sale for less than its book value (Assets + cash + short-term receivables - liabilities) is just silly.
A better system would be to have all buy-offers require permission by the corporation owner (or majority of the shareholders in the case of a publicly held corporation), and just have the computer always grant permission since I believe one of the objectives is to have stuff in human hands to the greatest extent possible.
Similarly, people who want their businesses auctioned can offer them up with a floor price and see if anyone bids. |
| Andy | Saturday, November 9, 2019 - 03:23 pm
There are many factors in the market value.
It also depends on the type of corporations (state, or private or public).
public corporation values are determined in the market.
Investment funds are quick to buy or sell shares depending on the P/E ratio and in fact help in setting bottom and top values depending on the corporate profit levels.
other corporations market value depend on their profits, their assets, their stability.
the main factor is the profit level and the P/E ratio that is computed from the profit and the market value.
As profits can change a lot from month to month, we look at a longer period and allow the market price adapt itself at a slower pace instead of allowing it to jump from month to month.
growing assets will make the value increase but not necessarily very fast.
and it can happen that the market value is under the assets value, certainly in case profits are low, or the corporation is making a loss.
if losing money, the high cash level may start to decline soon so profit level is much more important. |
| Will Walker | Monday, November 11, 2019 - 05:41 pm
Thank you for the clarification Andy, that is helpful.
That list bit concerns me. What's to stop someone from buying a corporation with 100B in assets and cash, for 30B, and then closing it to make a profit?
How does a player defend their corporations against this kind of attack, especially in the beginning? |
| Andy | Monday, November 18, 2019 - 01:08 pm
I do not think you have such corporations with 100B in cash and value of 30B.
Cash is moved to the owner if it gets too high.
there might be a case where it is close but not that obvious.
Presidents can prevent enterprises from purchasing corporations.
Having CEOs buy corporations in your country is profitable.
You get cash, they employ many workers, and pay the country for the facilities.
|
| John Galt | Monday, November 18, 2019 - 02:57 pm
You can Andy. Here is an example:
Belville Factory Maintenance in the country NORTH KIFT on LU.
Cash on hand: 59B
Total Assets: 99B
Market Value: 8B
Anyone that buys that corporation gets 99 billion in assets for the price of 8 billion. |
| Andy | Tuesday, November 19, 2019 - 11:24 am
True.
something is very wrong with this corporation.
a market value of 8B is unusual.
If it happens, it is an opportunity.
The market value will always mainly depend on the capability of the corporation to produce a profit. |
| John Galt | Tuesday, November 19, 2019 - 01:11 pm
I always buy corps like that. It usually happens when hiring is 5% for a long time. I buy them, move them, and pocket the profit. I think the asset value minus debts should be the floor price though. |
