$2 company

[peckhs]

Hi, some questions for the businessmen and towkays here
If a $2 company holds shares of another company with NAV of about $10mil, and if one was to sell the $2 company, is the value of the $2 company when selling based on it's holdings in the invested company?
How do buyers perceive the value of the $2 company?
Tks

 

[opulentgroup]

Re: $2 company

The $2 is just the paid up capital. The valuation of the company would be dependent on its holdngs of assets as well as the liabilities of the company.

 

[MaxPower]

Re: $2 company

perceived value + potential ...

but at the end of the day, a mutually agreed price between buyer and seller ...

 

[sszone]

Re: $2 company

hi peckhs,

for a $2 co, u will also need to know what is its cost of its shareholding in the invested co.
source of funds, since its $2 capital, if investment is like eg $5m....where did the balance come from?
loan from director? so in buying the $2 company, the balance of $4m+ debt still stand so they probably have to factor that in too during purchase

 

[peckhs]

Re: $2 company

tks guys, maybe I should make it clearer..

the $2 company was established as a holding company for a family. The company with the 10mil NAV has many shareholders from 2 different families, and one of the family decided to set up the $2 company to hold all the shares which belongs to the family. They paid a token sum of $2 to transfer the shares into the company, and of course the stamp duties.

Buying over the $2 company will mean holding the majority shares in the other company. So how should I value the company?

What will be the NAV of the $2 company? The positive assets(ie, based on the number of shares they hold in the bigger company)?

The reason why i am asking is because I have seen many smaller companies owning shares in other bigger companies, and I'm wondering how all this works and why they would want to do that.

The reason given to me was the holding company was set up for future planning as the patriach is getting old and is afraid that the children will sell the shares individually...

Advise???

Thanks

 

[totoseow]

Re: $2 company

GIC is a 1 dollar company....if u look at paid up capital.

 

[totoseow]

Re: $2 company

tks guys, maybe I should make it clearer..

the $2 company was established as a holding company for a family. The company with the 10mil NAV has many shareholders from 2 different families, and one of the family decided to set up the $2 company to hold all the shares which belongs to the family. They paid a token sum of $2 to transfer the shares into the company, and of course the stamp duties.

Buying over the $2 company will mean holding the majority shares in the other company. So how should I value the company?

What will be the NAV of the $2 company? The positive assets(ie, based on the number of shares they hold in the bigger company)?

The reason why i am asking is because I have seen many smaller companies owning shares in other bigger companies, and I'm wondering how all this works and why they would want to do that.

The reason given to me was the holding company was set up for future planning as the patriach is getting old and is afraid that the children will sell the shares individually...

Advise???

Thanks

if u share with me i will tell u the answer.

 

[peckhs]

Re: $2 company

if u share with me i will tell u the answer.

err... share what with you??
if you share your trading info with me.... kekekek

just a small company la, not of interest to you i think. their turnover lesser than your income i think... heheheh

 

[totoseow]

Re: $2 company

im kidding. but i think the answers r above.

 

[peckhs]

Re: $2 company

im kidding. but i think the answers r above.

thanks

:thinking:

 

[samuelx]

Re: $2 company

Stop thinking about the $2 paid up capital as anything to do with the value of the company and you will be less confused.

Ignore the $2 paid up capital for the time being.

There are many ways to value a company. People may use earnings and future earnings to value a company. People may use Net Asset Value to value a company (Total Assets - Total Liabilities). Market Value/ market capitalisation (value of shares), etc etc.

Depending on your purpose, you will use different methods of valuation. If liquidating, obviously you use NAV cause you dont care about future earnings - you just want to convert everything to cash. If an investor is looking to buy the company in a private sale of shares agreement - he will consider future earnings, etc. goodwill comes in, etc. etc. gets abit more complicated. If you are planning a takeover of a listed company, then quoted prices of shares on the exchange will be relevant....


You ask what is NAV. NAV is basically Total Assets - Total Liabilities. How to calculate this is simple. List out total assets.

This will include (but not limited to):

Cash
Book debt
Shares in other companies (this is your example)
inventory
equipment
land
IP rights

List out all the liabilities of the company, which may include:

Bank borrowings
Salary owing
current liabilities (book debts owing to other ppl).

Take aggregate of total assets minus aggregate of total liabilties, and you will get NAV.

Remember this is only 1 way of valuing a company.

What i shared are the basics..

You may be confused because you confused equity and paid up capital.

equity = Assets - Liabilities.

But note that equity is NOT equal to paid up capital.

Paid up capital, technically speaking, is whatever amount funded by the shareholders. or to be more specific, amount paid up for the sale of that company's shares. If the company was set up to have 2 shares and they were sold for $1 each, paid up capital is $2.

That doesnt mean the company's value is $2. Capital is made up of shareholder's equity (the paid up capital) and other forms of capital - shareholder loans, bank borrowings, etc etc.

sorry for rambling. i dont teach, so apologies if i didnt explain it well.

 

[peckhs]

Re: $2 company

Stop thinking about the $2 paid up capital as anything to do with the value of the company and you will be less confused.

Ignore the $2 paid up capital for the time being.

There are many ways to value a company. People may use earnings and future earnings to value a company. People may use Net Asset Value to value a company (Total Assets - Total Liabilities). Market Value/ market capitalisation (value of shares), etc etc.

Depending on your purpose, you will use different methods of valuation. If liquidating, obviously you use NAV cause you dont care about future earnings - you just want to convert everything to cash. If an investor is looking to buy the company in a private sale of shares agreement - he will consider future earnings, etc. goodwill comes in, etc. etc. gets abit more complicated. If you are planning a takeover of a listed company, then quoted prices of shares on the exchange will be relevant....


You ask what is NAV. NAV is basically Total Assets - Total Liabilities. How to calculate this is simple. List out total assets.

This will include (but not limited to):

Cash
Book debt
Shares in other companies (this is your example)
inventory
equipments
land
IP rights

List out all the liabilities of the company, which may include:

Bank borrowings
Salary owing
current liabilities (book debts owing to other ppl).

Take aggregate of total assets minus aggregate of total liabilties, and you will get NAV.

Remember this is only 1 way of valuing a company.

What i shared are the basics..

You may be confused because you confused equity and paid up capital.

equity = Assets - Liabilities.

But note that equity is NOT equal to paid up capital.

Paid up capital, technically speaking, is whatever amount funded by the shareholders. or to be more specific, amount paid up for the sale of that company's shares. If the company was set up to have 2 shares and they were sold for $1 each, paid up capital is $2.

That doesnt mean the company's value is $2. Capital is made up of shareholder's equity (the paid up capital) and other forms of capital - shareholder loans, bank borrowings, etc etc.

sorry for rambling. i dont teach, so apologies if i didnt explain it well.

Thanks! You explained it well.
I managed to asses the company based on their NAV. The other methods I don't know how... Future earning, goodwill etc...
Haha... Thanks

 

[samuelx]

Re: $2 company

Thanks! You explained it well.
I managed to asses the company based on their NAV. The other methods I don't know how... Future earning, goodwill etc...
Haha... Thanks

I suggest you hire financial advisers if you are investing or doing a sale and purchase, etc..... or get someone you trust and who is knowledgable to give you advise.

as i mentioned, NAV alone is an extremely poor method of assessing value of the company in most functions...

for small-ish companies, goodwill is negligible, esp if the coy isnt involved in alot of M&A.

 

[kenfoo]

Re: $2 company

Best to get prof advise.

 

[wobbles]

Re: $2 company

Two Dollar Company

I thought this was a thread created with the specific objective/target/purpose/AIM to discuss a certain company that was in the news lately....

Potong steam again.

 

[Red_Bean_Bun]

Re: $2 company

Thanks! You explained it well.
I managed to asses the company based on their NAV. The other methods I don't know how... Future earning, goodwill etc...
Haha... Thanks

the future one use npv. To sell the company one can consider terminal value .... Nav sometime not accurate .....