Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: Don Lloyd who wrote (29178)	2/25/2003 10:57:58 PM
From: Moominoid	Read Replies (1) of 74559

That is, to a sole owner. And personally I can't figure out a reason why a company would be worth more or less to a sole owner than it would be to a group of N owners. Except that the shareholder meetings might be a lot easier to hold. So to me, for my purposes, the company deserves no different price than what a sole owner would reasonably pay if he had to pick up the tab for running the business himself. The whole tab. A few reasons but I don't think much to do with utility theory... Tax benefits Control being the main ones I can think of.. Utility theory as you are suggesting would mean the company would be worth less to a single owner primarily due to increased risk relative to holding a portfolio of smaller chunks of different firms. But we observe the opposite in that takeovers happen at a premium. Various reasons to go public - raising cash for investment - even so that they can grant options to executives in some cases (why they just can't give them a bonus I don't know...). When the original owners want to quit because they want to move on and when the owners think stock market valuations are too high.... among them..... Selling some of your stock does reduce your risk as long as you retain the control/taxation benefits and so the utility theory will come in there. But it seems unless owners want out and move on generally owning the whole company is believed to outweigh the risks of doing so... Just my 2 cents of musings. moom

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