Nice try but this approach is consistent with bitcoin having many, many different possible prices including price=0. Think of it this way, if I create a company that does everything Apple does I’m a billionaire, but if I invent a cyber-currency that does everything Bitcoin does I have nothing of value.
I seriously don’t get it. If I have a company that makes products nobody wants, I also have nothing of value. Are you claiming that Apple products are inherently valuable? I don’t see that. Apple get’s money because people want their products and bitcoins have value because people want them. And the price of both Apple stock and bitcoin is determined by how many people want to buy and hold them in expectation of future profits.
If I have a company that makes products nobody wants, I also have nothing of value.
This is not true. Your company, presumably, has some assets—maybe a factory, maybe an office building, maybe some inventory, likely some cash in a bank account, etc. If you were to shut down the company which makes products nobody wants and sell its assets, you would end up with some sum of money. This is the company’s residual value or (assuming the accounting is broadly in line with economics and you’re not selling at firesale prices) its book value.
And some liabilities. Apple e.g. in 2013 had 8.71B cash + 1.76B inventories and 16.96B debt. So if suddenly nobody wanted Apple products anymore, guess what the shareholders would get.
According to Yahoo! Finance Apple’s total assets are about $200B and their total liabilities are about $80B. (Or were in late September 2013, the latest for which they give figures.)
(Curiously, the figures there match yours for inventory and debt, but they give a much larger figure for “cash and cash equivalents” than yours. But as the totals indicate, the numbers you mentioned are very far from telling the whole story.)
So, it looks as if Apple has about 6 billion shares, and their net assets minus liabilities are a bit over $100B. So if people suddenly stopped buying their products (in some way that didn’t change the value of their assets, which would be a bit hard but never mind) then each share would be worth about $17.
[EDITED to fix an idiotic factor-of-1000 error; oops. Thanks to Lumifer for pointing it out.]
Of course. It’s perfectly possible for a company to have zero or negative book value. Your Apple numbers are quite a bit off, though—look here for example.
The issue, however, is not what the price is determined by—for all tradeable goods in a more or less free market the price is determined by supply and demand and, yes, it is true for both bitcoin and AAPL shares, but it’s also true for tulip bulbs and old baseball cards. The issue is that you said that that bitcoin prices are “anchored” in the same way the equity share prices are anchored and I don’t think this is so.
Nice try but this approach is consistent with bitcoin having many, many different possible prices including price=0. Think of it this way, if I create a company that does everything Apple does I’m a billionaire, but if I invent a cyber-currency that does everything Bitcoin does I have nothing of value.
I seriously don’t get it. If I have a company that makes products nobody wants, I also have nothing of value. Are you claiming that Apple products are inherently valuable? I don’t see that. Apple get’s money because people want their products and bitcoins have value because people want them. And the price of both Apple stock and bitcoin is determined by how many people want to buy and hold them in expectation of future profits.
This is not true. Your company, presumably, has some assets—maybe a factory, maybe an office building, maybe some inventory, likely some cash in a bank account, etc. If you were to shut down the company which makes products nobody wants and sell its assets, you would end up with some sum of money. This is the company’s residual value or (assuming the accounting is broadly in line with economics and you’re not selling at firesale prices) its book value.
And some liabilities. Apple e.g. in 2013 had 8.71B cash + 1.76B inventories and 16.96B debt. So if suddenly nobody wanted Apple products anymore, guess what the shareholders would get.
According to Yahoo! Finance Apple’s total assets are about $200B and their total liabilities are about $80B. (Or were in late September 2013, the latest for which they give figures.)
(Curiously, the figures there match yours for inventory and debt, but they give a much larger figure for “cash and cash equivalents” than yours. But as the totals indicate, the numbers you mentioned are very far from telling the whole story.)
So, it looks as if Apple has about 6 billion shares, and their net assets minus liabilities are a bit over $100B. So if people suddenly stopped buying their products (in some way that didn’t change the value of their assets, which would be a bit hard but never mind) then each share would be worth about $17.
[EDITED to fix an idiotic factor-of-1000 error; oops. Thanks to Lumifer for pointing it out.]
That’s billions (thousands of millions), not millions.
Apple’s book value per share is about $20.
Of course. It’s perfectly possible for a company to have zero or negative book value. Your Apple numbers are quite a bit off, though—look here for example.
The issue, however, is not what the price is determined by—for all tradeable goods in a more or less free market the price is determined by supply and demand and, yes, it is true for both bitcoin and AAPL shares, but it’s also true for tulip bulbs and old baseball cards. The issue is that you said that that bitcoin prices are “anchored” in the same way the equity share prices are anchored and I don’t think this is so.