Considering so many public, profitable tech companies saw their valuations go down by 50-70% in that same period, that still seems too little of a cut.
Public companies have more external influences on their valuation. It's not like they literally lost 50-70% of their intrinsic value, only what the market with the associated psychology says they are worth. Private companies can stick closer to that intrinsic value.
> Private companies can stick closer to that intrinsic value
It's normally the opposite. Public markets are a lot better at judging intrinsic value than a handful of VCs. Every single private company out there is either wildly over or under-valued, more so at earlier stages.
Not to mention, VC valuations have all sorts of hidden stipulations such as liquidity preferences which skew headline private valuation numbers unnecessarily high. Public markets have a full view of the cap table and can better evaluate price w/o hidden tricks.
Stock has very little to do with “intrinsic value”. The share price is what an investor is willing to bet on the future of the company improving.
This is why companies with lousy future outlooks will sell for a lower price than their assets - debts.
There is no intrinsic value that private companies can stick to. They just have the power of controlling sales so they take sellers out of the market until they get the price they want at a volume they are comfortable with.
Stripe isn’t “intrinsically” worth anything that anyone will agree on. To one person it would be the cash in the bank minus liabilities. To someone else it would be a hefty multiple on that because they believe in the business.
Yes, this is important. Stock price reflects future earnings growth potential. That's a mouthful(!), but consider if Google announced 0% growth in earnings, but still same profits. Their stock price would be crushed. This essentially happened to all major investment banks after 2008 crisis. When 30:1 leverage on balance sheet was no longer an option, forwarding looking earnings growth looked tiny compared to 2007.
I see the term "intrinsic value" frequently used incorrectly. Mostly, it is used in finance to describe the value of an option when "in the money" (underlying is above/below strike price for call/put). Perhaps they means book value, which the value of the company if all assets and liabilities were sold at market prices. For most pure services companies, it is very low (perhaps negative due to liabilities), as the accounting rules for book value are very strict.
The use I’ve seen in the vernacular is “what are the cash flows worth on their own?” (Discounting back the future ones adjusted for risk) Sometimes people state they know it with confidence, but it’s subjective too (the science on discount rates and predicting growth is a lot weaker than Physics).
It leaves out things like “what might the IP be worth to someone else?” and “What could the company do with better management?”
To your point, it’s frequently less than what the company trades at. Sometimes the opposite is true, and the company trades for less than the cash value of its assets minus liabilities.
