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by perl4ever
2472 days ago
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"Having someone actually pay money for something really is the acid test." Ah, but having someone actually pay money for 0.0000001% of something really is not the acid test. If someone pays you $1 to sit in your car for a minute, given that cars have a reasonable lifetime of around 15 years under normal conditions before being scrapped, then obviously your car is worth about 8 million dollars. Or not. |
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If you pay me $1 to sit in my car for 1 minute, the setup costs (time) dominate the actual act. I'm not sure why someone would pay me to sit in my car for one minute but I'm sure we could tease out some other reasons.
If I'm only buying 0.0000001% of a company, I'm getting proportionately less than someone buying 10% or 100%. They can start giving people board seats, the can actually ask questions of board members and expect an answer, so I would expect, and indeed there is different valuations for me buying 0.0000001% and someone who buys a large %age of a company.
This price difference applies to many (all?) things, if I buy 1 X if would expect to pay proportionately more than if i bought 1000000 X. We can all accept that the price of a coke is X, whilst also accepting that we'd get a discount buying more units. Likewise if I wanted to buy 0.000001% of the global steel supply, id expect to pay the market rate. If I wanted to buy 100% I'd have to pay more than the otherwise prevailing rate.
Having said all that. To actually return to wework. Their business model is taking a big building and parcelling it up into small pieces. How do we value that building? Based on the whole building, which non of those tenants would be able to afford, and it's lower than the sum of all those small parcels the tenants have, but the value of the building is informed by the willingness of some smaller tenants to come together and rent parcels, so....
As I said on a prior post, it's an answer, not the answer. The price for the whole is different to the price for pieces. The prices for thinly traded assets will be impacted if you start flooding the market. One market will value an asset differently to another. Nevertheless this is a data point, and at this stage the best we have.
Ps Softbank have bought a hell of a lot more than 0.00001%, I believe they've invested about $8 billion overall.