Quote:
Originally Posted by EddieP
You’re speaking as if a Company has no intrinsic which is totally false. A simple google search can answer that question.
I’ ll make it easy for you:
Intrinsic Value Defined:
Intrinsic value represents the "true" or "fundamental" worth of a company, as opposed to its market price, which can be influenced by market sentiment and speculation. It's essentially what a rational investor would be willing to pay for the company, given its underlying characteristics.
Cash Flow as a Key Component:
Future cash flows are a primary driver of a company's intrinsic value. A company's ability to generate cash, whether through dividends, earnings, or free cash flow, is a major determinant of its worth.
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Thank you, you have made it easy to pick apart the fallacies in your argument.
The problem with that classical simplistic definition is that it conflates control of underlying assets and cash flows with ownership of a minuscule unsecured general claim on the business. That is what the securities industry uses to sell stock to retail bettors, er, investors.
Think about it this way: if an alien landed and you had to explain what owning 100 shares of Disney stock means, what would you say you have? Control over the assets or cash flow of the company? Nope. Not unless you are spending millions or billions to gain an appreciable percentage of the entire float, and can get onto the board. Even then, you don't have control unless you control 50%+ of the shares AND can do what you want without the other shareholders suing you in the process. The right to vote on corporate board members? Who cares: you are asked to elect some nominees you don’t know, did not select, and do not control once they are on the board. Dividends? That is not a right, it is a privilege: the board can suspend dividends at will. Anything that someone else can take away is not a right. You don't even have the right to keep your stock. The board can engineer a merger, dilution or sale of the company, or an outsider can make a coercive offer for a majority control of the company and if you hold out you will either be shut out of management or you will be forced to sell. Look at squeeze out and freeze out cases. Oh, and don't forget the creditors of the business: they get paid first before a shareholder sees a dime of the underlying assets. Most companies that are liquidated in bankruptcies yield nothing for the shareholders.
If you don't actually control the assets and can't actually do anything with them, the supposed intrinsic value of what you have as you have defined it is zero. A stock purchase in a public company has value only because the people who are involved in the system with you agree that it does. In other words it is a shared belief system in the value of what the stock represents.