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The real meaning of shareholder value

I can’t help agreeing with this statement every time I see a small shareholder in the news talking about how much money they have lost because the value of their shares in a particular company has gone down in the last year:

“…in order to believe that shareholder value makes sense, you also have to believe that if you buy a stock at $100 and it drops to $50, then you haven’t lost any money so long as you haven’t actually sold the stock. And there aren’t many people who really believe that.”

The quote comes from this post, where Felix Salmon at Reuters looks at the history of the term “shareholder value” and concludes it actually meant long term ownership.

The argument is that shareholder value is very different from today’s stock price.

Couldn’t agree more.

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