Quote:
Originally Posted by Hog Farmer
Market cap is not an indicator of the value of a company . Some people think it is but its not.
|
errr...actually it is. Price per share times number of shares outstanding is market cap, as I'm sure you know, and is what the market thinks the company is worth. Typically when someone wants to buy the company -- in a going private transaction or otherwise -- then they offer to pay some premium to the market cap to entice a high enough percentage of the stockholders to sell and then they can clean up the rest.
So yeah, it's not a PRECISE indicator of value, but it's the BEST indicator of value on any given day.