I've owned IACI for at least a year now and I've constantly read about what a "cash machine" the company is. I've never understood why the market doesn't appreciate this stock more.I've also read repeatedly that Diller spent more than $20 billion assembling the components for IAC. Yet after yesterday's run-up, the market cap is still only $9.5 billion.Is Diller crazy and just seriously overpaid for IAC's component companies -or- is Wall Street totally blind to the combined value of the conglomerate?I suppose that possibly the $20 billion figure includes Expedia, which is not included in the current market cap.Finally, if Diller did pay $20 billion for the current IACI (figure doesn't include Expedia) and the market cap is only $9.5 billion, does that indicate that initial IACI investors have watched the value of their investments drop by half? Thanks for any help understanding this...
The market cap, of course, is what the value of the company is in terms of stock value at the current price. The $20MM he paid for the technology could have been expensed against income as R&D cost or could have been capitalized (or carried as goodwill) and would have no influence on the stock price if the price was under book.For example, if I own a company worth $10 million and tomorrow I pay $500K for the right to use "kmorley123" in my business, the valuation is still $10MM. I could put the asset on my balance sheet but it doesn't increase the market cap unless the market recognizes the value of what I bought and runs the stock up.
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