Quote:
Originally Posted by notime
A friend of mine who sold his company to an other company noted on the stock exchange 8 years ago, he frequently visits my office just to chat, have coffee, talk about life, problems with kids/wife and do gossip and all. He once said this to me, and I recall it perfectly: "If you have a company doing 100M per year making 1M profit and you go public IPO, how can a company be worth a billion a day later, since they still doing the SAME 100M in revenue and making the SAME 1M in profit? Nobody could ever explain me that logic, I just can't grasp it but I was paid for it, don't ask me how but it happened."
He never mind the fact he got paid but he never really understood how that system worked and why it's there in the first place.
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Which stock market do you mean, Jack?
There is a major difference between valuation of assets in the Anglo American banking and continential banking.
While EU stock markets are in general very strict about valuation (as far as I'm concerned you can't include for example future revenues from already signed contracts into accounting etc. etc.) plus everyone is crazy about taxes.
US is exactly the opposite and you try to valuate your company / revenues / figures as high as possible.
An extreme example is what happened with Enron, of course hiring a consulting company to fake your audits is not exactly a standard procedure, but they were granted to use the, now I can't think of the correct term, method of valuation where you operate with all future revenues or revenues that were not cashed yet.