That right there is the answer. Many companies and assets are very hard and sometimes impossible to monetize. Look at all the Private Equity Unicorns, Uber, Lyft... there are a whole slew of them and it appears that they may have had their peak theoretical public market price a year or more ago.
There is the quite often a huge bid ask spead between what you the bid for a business is and the asking priceof the owners of the business. That's why there is an entire industry of business deal brokers to try to bring those huge bid ask spreads to a single agreed upon price.
With all of the talk about Netflix today and for the past number of months on cnbc's 12 PM ET and 5 PM show There is always talk of Netflix's P/E multiple, the business they have built / and how they would be a great acquisition by a DIS or other company, however now the Market Capitalization is growing too large. Talk about how they have become part of the american way of life... ( with growth opportunities overseas... Narcos Season 3 has gotten more plugs today than I have seen since Game of thrones.
Regarding ...... Netflix, it was was fully schematized and fully laid out as a working viable business by Enron back in 1999 and 2000. Enron had correctly seen the huge future and value of broadband communications they had some physical infrastructure, they were making a market in forward, long dated pricing of broadband usage costs, they had a deal with Blockbuster to distribute content.
Had Enron had a New York investment banking division, that focused on origination, securitization and underwriting
a 3 minute video on the securitization food chain
Vlad managed to do it in 2 minutes and also demonstrate the 5 financial institutions and the 3 credit ratings agencies that made thousands of employees very wealthy and millions of people MUCH Poorer.
they would have spun off their broadband movie delivery over the internet business and in the Speculative mania, with accompanying massive price to sales multiples that were 120 times revenues for Ariba, Commerce one and a number of businesses; Enron would have raised $200 to $300 million or more for their IPO had it been offered in late 1999 or early 2000 and Enron would still be in business. That is something that no one in the business, government or even the techno -geek community seems to understand..... No one has ever connected the dots..... other than me, to my knowledge.
The head of the Enron broadband division after several years of trial was found not guilty of all charges, as by that point it was obvious to everyone that what they had put together was not a scam it was the future...
it is Netflix! I am friends with John Greene who ran the Profitable trading department within Enron
Hi Macavity, no question that a big Part of Enron's expansion strategy was to become a major market maker in bandwidth. The stock traded about 4 times as high as it ever should have due to the allure to investors that "broadband" and "internet" opportunities that were thought to be out there.
As you can see in this very good article from the Journal Enron had spreads of 20% on some of it's short term electricity contracts. Those are huge.
Beyond that Enron was making markets in bandwidth contracts where the ask was 8 times the bid. All kinds of accounting techniques can be used with such huge disparities in the numbers.
On most contracts for short-term deliveries of natural gas, bid-ask spreads are fairly small, about 1% or so. But even for some short-term electricity contract prices quoted on Enron's now-shuttered online trading portal, spreads of 20% were common. On contracts for short-term delivery of telecommunications bandwidth, Enron often posted "ask" prices that were as much as eight times the posted "bid" prices.
For other long-term derivatives, such as electricity contracts stretching 20 years or longer, market quotes don't exist. In such cases, companies are allowed to base contract valuations on their own undisclosed estimates, covering everything from future commodity prices to credit risks and discount rates.
Off Wall Street was opining that Enron's margins were deteriorating and that the company was worth much less in May of Last year.
SUMMATION: There is quite a bit of material in this post that shows how massive the change in prices, is when you go and pay top dollar, boutique retail prices for anything from a financial asset, to a dining room set , car etc.
And the buy for a nickel on the dollar distressed liquidation prices available under times when the sellers are overwhelming the buyers.
This concept is not at all well understood by a huge section of the investing public... and even among the much of the business community. When it comes to how and why the stock market and other financial markets work, and why bull and bear markets and large changes in asset prices occur over TIME.
Oscar-Winning `Inside Job' Director Attacks Economists' Ties to Financial Sector
Goldman Sachs being grilled by the Senate Finance committee regarding the thefts committed prior to the Great Financial Crisis of 2007-2009