How assets are valued has recently become front-page news because of the current litigation between NYS and President Trump. Valuation has always been a contentious issue since most values are guesses of what something is worth based on how it will perform in the future. In effect, a current value is today’s quantification of the future value or benefits of what is being purchased. We contend that all valuations are somewhat illusory.
In 2019, Lou Young, CVA, a valuation specialist at Withum, and I authored a two-part series on the Illusion of Value, providing about 20 actual situations where values were either grossly understated or overstated. We did not offer any judgments but presented the circumstances or underlying issues that affected the valuations. Because of the Trump case, I relooked at what we wrote and summarized it here and provided links to the full original articles.
- NY Yankees and NY Mets. Why the Mets sold the naming rights of their stadium to Citibank for $20 million a year and the Yankees decided to keep its own name and how the value of the teams factored into the decision.
- Why car dealerships have a surplus of ready buyers even when some lose money and the value considered in these decisions.
- Why Elaine’s restaurant folded after she died.
- How Skype was bought and sold a few times until Microsoft acquired it for $6 billion more than the seller paid for it 18 months earlier, and how that seller bought it from eBay that took a $600 million loss on it.
- How stock market values can change quickly.
- How Hilton increased in market value by $750 million when they announced that Stephen Bollenbach was becoming its new CEO.
- In 2015, the Los Angeles Dodgers sold for over $1 billion more than the owners valued it 9 months earlier in a very contentious divorce settlement with top valuation experts representing each combatant spouse.
- How Rupert Murdock created the Fox Network by drastically overpaying for NFL television rights that added billions to his net worth.
- The secret behind the loss of value of World Wrestling Entertainment.
- Jacqueline Kennedy Onassis estate’s legitimate and honest meaningless estimate of its value.
- Michael Jackson’s estate was valued by the IRS at $434 million when the executors valued it at $2,105.
- The Empire State Building was purchased by Donald Trump for $25 million less than the tenant was spending at that same time to replace its windows.
- Understanding value drivers and the 1961 $2.3 million purchase by the Metropolitan Museum of Art of a Rembrandt painting as a value builder of the museum.
- The value of a bull that its owner paid $4,000 for and for which he received revenues selling enough semen that fathered 500,000 offspring.
- Why Steve Ballmer paid $1 billion more for the LA Clippers than it was “worth” a minute before his offer and how that changed the prices for every sports franchise thereafter.
- Microsoft’s terrible drop in value under Steve Ballmer’s reign as CEO versus what he did to create the base for its future growth by more than 10 times after he left.
- How Warren Buffett created value for Berkshire Hathaway and what measure he [and I] recommend to be used in valuing companies.
- New business models that created value and other stories, including how Hilliary Clinton got a bump up in contributions in 2016 when she added someone to her staff and the value of a Made in the USA label.
Lou and I hope you enjoy reading about this as much as we did writing it.
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