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Technology Stocks : Oracle Corporation (ORCL)
ORCL 220.61+0.3%Nov 18 3:59 PM EST
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To: hueyone who wrote (17742)1/6/2003 9:20:38 PM
From: lml   of 19079
 
"If you were the only shareholder of Oracle, and you could not reasonably expect to sell the company to someone else, thus being forced to rely strictly on Oracle's business performance for your well being, you would probably be seriously disappointed so far to learn that your 4.84 billion dollar investment had only produced a 9% total return (456 million dollars) over 14 years (assuming the 4.84 billion from shareholders came in the beginning which is not true)."

The fallacy in your analysis is that it is unreasonable to have the expectation of not being able to sell the company to someone else. Such presumptions belie share price. Obviously other valuation approaches are necessary to reflect to true market value of one's initial investment.

"Now of course, Oracle has intellectual property, real estate and other intangible assets on the books that are not carried at market value, so it is up to you and me to decide what these assets will earn going forward and what they are worth and reflect them in our own estimates to determine Oracle's market capitalization."

That's right. But its not up to you or me, but rather the market. Bottom line, if a shareholder wished to sell today, the ROI from 1989 would be handsome because the market holds certain expectations for ORCL going forward.
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