<p>This is the reverse of the accounting procedure discussed in my answer to this question: <a href="https://economics.stackexchange.com/questions/20464/how-to-calculate-average-buy-price-when-you-buy-sell-and-rebuy/20466#20466">link to question</a></p>

<p>What you want is the average cost basis for all holders of company.</p>

<p>There is no practical way that this could be calculated for a public firm. Nobody is required to report that information, and not everyone uses that accounting method for equities for taxes. </p>

<p>It would also be highly biased against firms where the founders hold a significant portion of shares. In an IPO, only a portion of the total number of shares are sold, sometimes only 10% of the firm. (Your example implies that 100% of the shares are sold in the IPO, which is misleading.) it is entirely possible for a founder of a company to retain control of a large percentage of the shares for decades. This method would assign almost no value to that portion of the company, which makes the valuation given meaningless for analysis.</p>

CC BY-SA 3.0
2018-02-08T20:40:58.057Z
If I understand it, it's not the reverse but the same. Thanks for pointing out that it's the average cost of the shares. Not to be confused with the average price which is not weighted by the trade volume. Whether it's practical or not could be a follow-up question, the answer would probably be that one can only estimate it. I find this quantity important since it shows how much money went into the system, and not how much money could theoretically leave it under the ridiculous assumption that the price stays fixed while everyone is selling.
Elon Musk
CC BY-SA 3.0
2018-02-08T13:30:15.453Z
2018-02-08T13:30:15.453Z
Brian Romanchuk
<p>I wonder what the term "value" of a company, currency, etc could mean. The most obvious, to me, is market capitalization (related: <a href="https://economics.stackexchange.com/q/17724">Clarifying the meaning of market capitalization</a>)</p>

<p>Is there also something like measuring how much money has been spent for the shares that are currently circulating.</p>

<p>E.g. there is an IPO for 1000 shares each at 1\$, all of them are sold. Then the price rises to 2\$ and 500 of the shares get traded for this value. Then the classical market cap would be 2000\$, and the measure I wonder about would be 1500\$.</p>

<p>Does this have a name?</p>

<stock-market><value>
Alternative measure for market capitalization, company "value"
Elon Musk
# Alternative measure for market capitalization, company "value"

(Asked by: username_0 on 2018-02-08)

I wonder what the term "value" of a company, currency, etc could mean. The most obvious, to me, is market capitalization (related: [Clarifying the meaning of market capitalization](https://economics.stackexchange.com/q/17724))

Is there also something like measuring how much money has been spent for the shares that are currently circulating.

E.g. there is an IPO for 1000 shares each at 1\$, all of them are sold. Then the price rises to 2\$ and 500 of the shares get traded for this value. Then the classical market cap would be 2000\$, and the measure I wonder about would be 1500\$.

Does this have a name?

**Tags:** stock-market, value


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## 1 answers

### Answer by username_1 on 2018-02-08. Score: 1 | Accepted answer

This is the reverse of the accounting procedure discussed in my answer to this question: [link to question](https://economics.stackexchange.com/questions/20464/how-to-calculate-average-buy-price-when-you-buy-sell-and-rebuy/20466#20466)

What you want is the average cost basis for all holders of company.

There is no practical way that this could be calculated for a public firm. Nobody is required to report that information, and not everyone uses that accounting method for equities for taxes.

It would also be highly biased against firms where the founders hold a significant portion of shares. In an IPO, only a portion of the total number of shares are sold, sometimes only 10% of the firm. (Your example implies that 100% of the shares are sold in the IPO, which is misleading.) it is entirely possible for a founder of a company to retain control of a large percentage of the shares for decades. This method would assign almost no value to that portion of the company, which makes the valuation given meaningless for analysis.

> **Comments:**
> **username_0**: If I understand it, it's not the reverse but the same. Thanks for pointing out that it's the average cost of the shares. Not to be confused with the average price which is not weighted by the trade volume. Whether it's practical or not could be a follow-up question, the answer would probably be that one can only estimate it. I find this quantity important since it shows how much money went into the system, and not how much money could theoretically leave it under the ridiculous assumption that the price stays fixed while everyone is selling.  

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