Is Intristic Value the Best Approach to Investing? - Page 2
With these dissenting ways of calculating value, we may have a wide range of intrinsic values that vary between the seller and the buyer of a business, with the actual price being somewhere in the middle.
To complicate things more, there is also the value of a business to a minority investor to contend with. This would be more the scope of the common investor. While this value may also have a wide range, it is safe to say the value of a business from a minority shareholder standpoint would be considerably less than it would be if you were to buy the whole business because we lack a control premium — or the premium attached to value for having control over things such as capital structure and asset use.
My advice is to be very cautious as to how investors value investments. Perspectives need to be accounted for and a range of values should be calculated. Only when you are comfortable with the most conservative estimate of business value should you make the decision to invest in a company.
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