I was thinking about this, and was wondering if anyone on here who is a financial nerd can comment. Is market cap really a good way to measure the value of a company? My understanding is that market cap is (spot price * outstanding shares). The problem is that the spot price is representative only of what a single pair of investors believe their shares are worth.<p>It seems like a better valuation would be something like, "How much would you have to spend to buy the company." Which at any given instant in time is much higher than the spot price-share product, and also probably fluctuates much more slowly.
>Aside from higher expenses and a lower operating margin, it’s hard to find a metric by which Facebook is worse off than it was a year ago. And yet we the market public value the firm at $24 billion less than on its first day.<p>How is this surprising? Growth is always priced in. Stock prices move because expectations change, not because a company changes.
Flagged and others should, also. I don't think we need to feed TC any more clicks for worthless content.<p>Edit: if you need any more evidence to flag it, just witness the quality of the comments this "article" inspired.
>Facebook has torched tens of billions of dollars of shareholder equity since it first went public.<p>Not necessarily. Price movements in a stock are not necessarily caused by bad decisions of the company. Stock prices can change for many reasons outside of the company's control. By the article's logic, the Facebook torched a lot of shareholder value on the day of its IPO. But that day, Facebook made very few decisions, despite its price falling drastically. Rather than Facebook's bad decisions, I'd argue that investor uncertainty was the driver of the price movements.
I'm trying to recall what innovations Facebook has introduced since the IPO and can't think of anything except a failing skin for Androind. What am I missing?