Zynga stock plummets below value of its cash and real estate

Re:Zynga stock plummets below value of its cash and real estate by fleitz on Wednesday October 10, 2012 @06:16PM (#4638476)

The price of a stock as with any other price merely reflects supply and demand and not it's intrinsic value which is generally unknowable.

If you have an opportunity expected to double your money then it makes sense to sell an asset below 'asset value' to avoid taking on missed opportunity costs.

Example:

  You have $1mm in Zynga stock @ $2.35, and no cash on hand.
  You expect the stock to trade at $2.85 in 1 year.
  You have the opportunity to buy APPL and expect AAPL to double in 1 year.

  The EV of AAPL is $2 mm
  The EV of Zynga is $1.21 mm

Therefore excluding transaction costs it's the smart play to sell Zynga stock for any price above $1.87.

Since you've probably lost heavily on Zynga you can use the tax losses from a sale to offset the gains from the APPL profit, where as holding Zynga for the EV would merely result in a reduced tax loss.

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Re:Zynga stock plummets below value of its cash and real estate by nnnnnnnn on Wednesday October 10, 2012 @07:06PM (#4638619)

"buy APPL and expect AAPL to double in 1 year."

Big error. You can predict a stock doubling in value a year in advance?

Your numbers are less shocking when you plug in more reasonable expectations, say 6% market index instead of 200% home run.

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Re:Zynga stock plummets below value of its cash and real estate by westicle on Wednesday October 10, 2012 @07:47PM (#4638726)

The actual numbers here are irrelevant; gp was providing a hypothetical in which it makes sense to sell a stock.

If exaggerated numbers make the hypothetical concept easier to grasp I don't think it detracts from the example to use them.

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Re:Zynga stock plummets below value of its cash and real estate by tisme on Wednesday October 10, 2012 @07:51PM (#4638734)

If you're going to buy one stock it doesn't really matter how much another stock will increase in the next year ;)

(I'm prety sure that Appell Pete Corp would be psyched if enough people make this mistake).

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Re:Zynga stock plummets below value of its cash and real estate by fleitz on Wednesday October 10, 2012 @07:55PM (#4638742)

Because no one looking for market index returns would hold Zynga in anything other than an index fund. If you hold zynga you're looking for a homerun, or a trader.

Thus I used numbers that would appeal to the type that might hold Zynga stock. The type that had a risk profile involving losing 90% of the stock's value in 6 months.

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