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I bought 1 widget for $50 & sold it for $100. The customer tells me he would buy 99 more widgets for $100 each & I can buy them for $50. I spend my $50 profit on the first widget buying another $50 widget.
Some ppl think my business is worth $0 because it has no free cash flow.
Some ppl think my business is worth $0 because it has no free cash flow.
I sell my second widget for $100, and now I buy 2 widgets for $50 each and sell them.
A twitter commenter comments "for this business to be worth more than $0, it would have to distribute at least 3 widgets worth of cash flow per year."
A twitter commenter comments "for this business to be worth more than $0, it would have to distribute at least 3 widgets worth of cash flow per year."
I sell my 2 widgets, and with my $200, buy 4 more widgets.
The same twitter commenter comments "now this business would have to distribute at least 4 widgets of cash flow per year!".
The same twitter commenter comments "now this business would have to distribute at least 4 widgets of cash flow per year!".
I sell my 4 widgets ($400) and buy 8 widgets.
The same twitter commenter comments "This business is clearly overvalued. They have to keep spending on widgets to make it work and there is no excess cash flow."
The same twitter commenter comments "This business is clearly overvalued. They have to keep spending on widgets to make it work and there is no excess cash flow."
I sell my 8 widgets ($800), and buy 16 widgets.
The same twitter commenter comments. "This business would have to distribute at least $200 per year to even come close to making sense. But they can't because they keep buying widgets!"
The same twitter commenter comments. "This business would have to distribute at least $200 per year to even come close to making sense. But they can't because they keep buying widgets!"
I sell my 16 widgets ($1600), and just to piss off the guy who doesn't understand business or how GAAP accounting often is not representative of intrinsic value, I only buy 28 widgets ($1400), and I pay a $200 dividend.
