₦airaland Forum

Itzlinda:
I agreed with you on this.
Thin liquidity can absolutely distort valuation, agreed. But that doesn’t make market cap meaningless, it just means market cap is a market pricing metric, not a guaranteed intrinsic value calculator.

Thin liquidity and scarcity can push valuations far above fundamentals temporarily, but that’s also how bubbles form. Once sentiment or liquidity reverses, the correction can be brutal. That’s literally how bubbles work.

Thank God we both agree on something. Can I get your number?

Pesuzok:
From my understanding, market cap is what the market feels the business is worth or it's future worth should be. That a house is worth billions in the market doesn't mean you will easily sell it if you want to. If I have similar house in the same area, then it's ok to say my house is worth the same amount.

I don’t think so. The market is pricing individual stocks, not market cap directly. When you buy DANGCEM at 1115, you are not thinking about a one-trillion-naira market cap; you are thinking about the current stock price in comparison to your own internal fair value.

I think market cap is mostly used for sensational headlines. Or do you first check market cap before valuing the business?

chimex38:
I agree. It's just that some investors do use it as though there's an apparent buyout at any instant of time.

Yeah, I think real analysts use book value plus premiums for future cash flow, brand strength, and other factors, not market cap. If their valuation aligns with the market cap, then good. Market cap can be manipulated, even legally.

deathwing:
The guy who spoke about his farm made a tongue-in-cheek comment. He was highlighting the absurdity of the market cap (whether it is translatable into actual cash or not). The whole point was that the Zichis valuation had gone out of hand...so perhaps he should jokingly make himself even rich by coming to the market since his own farm is comparable.

OK, then there is no limit to valuation. That is why market cap is not a very serious metric. We can keep exchanging 20 shares between ourselves, and if we somehow legally prevent the remaining shares from being traded until the stock rises 100 times, it completely undermines the meaning of market capitalization.

chimex38:
Interesting voting analogy .
But, Recall Dang cement bought back shares at circa 300 or so.

So giij6ny your analogy, same as Presidential aspirant voting for himself multiple times in an election based on his capacity.
Don't really know how this proves or counters your point
But yeah, just to chip in.

You know, it is always good to revisit why an argument started in the first place. Somebody claimed that his farm, or some farms he knew, had more resources than Zichi, so if Zichi’s market cap was 48 billion at the time, then his farm should be worth more.

I countered that market cap should not be taken too seriously because it is a theoretical figure that is difficult to translate into actual cash or even true worth. Zichi’s 48 billion valuation does not mean much unless there is a buyer willing to acquire all the shares at that valuation.

nosa2:
If Dangote wants to pull out N1trn from NGX he will fail woefully but if he decides to pull it out on NYSE he will succeed. Lack of liquidity doesn't mean the asset is not worth the market price.

There are offices in fund management firms that handle purchases/sales simply because they want to take position without moving price too much. Your argument is right and wrong at the same time. It is right because the price will move temporarily but it is wrong because the price movement will be temporary.

P.S. Did you buy some Access bank today?

Ok, let’s put the NYSE aside first. Do you know it is the same liquidity and scarcity that made it reach trillions over time? I don’t think more than 10–15% of the shares were traded in the last four or five years it took Dangote Cement to move from 115, where I initially bought it, to today’s 1115.

It’s like a presidential election where you count votes from Lagos State alone to determine who becomes president. If you counted all the national votes, that candidate may not win or even come close.

With a constant supply of shares available to whoever wanted them, I doubt the price would have appreciated that much. Of course, book value and future earning power are also important.

So, I don’t take market capitalization too seriously unless an entity is willing to buy the entire company at that valuation.

Afromentalist:
Why does it pain some of us whenever a negative analysis is done to a stock we like. Emma is entitled to make his analysis especially when it is backed with facts and figures. That you can have same in chatgpt does not prevent him from making his own analysis.

Have you seen how he reacts when someone comes on with a different opinion about the stock he is trying to promote? Did you check his countenance when NAHCO was negatively analyzed? Plus, I was joking and getting you triggered and irked for laughs.

Also, the same goes for my post, I’m entitled to call anyone out. The forum is open to every school of thought. Thank you.

Streetinvestor2:
How about in a situation the person/people manipulating the SP target is just to get half of that market cap because he knows even at half it is still a win because he/she knows the business will still be overvalued at half price. I hope I am making sense like the case of geragu power plant which was sold way below what ote had taken it but it was still a cash out for him.He did it in some other companies too like forte oil

You are making sense. He could not sell all he wanted on the market at that capitalization, so trying to sell such a large quantity significantly reduced the market cap. That is exactly what I am saying.

Dangote Cement will likely not realize its current market cap if all the shares are brought to the market now. So, the current market cap is not fully realizable unless there is a buyer willing to acquire the whole company.

chimex38:
Well I disagree.
Rather, @bolded is reason why market Cap should be taken too seriously.
It guards valuation(EV and co) for buying entities..

As someone else already mentioned. It's not for liquidity purposes.

Ok, I don’t use market cap in my valuation. I try to compute fair value as best as I can, then check whether the current price is above or below it.

Like I pointed out, market cap depends to a large extent on liquidity, just like the price from which it is calculated. A few traded shares can end up determining the value of the entire outstanding share count; I don’t see how that is proper.

But you still cannot realize that entire market cap figure in cash immediately, only in theory.

Itzlinda:
I get your point, but that’s still not how market cap works. It’s not scaling up a few transactions to value a whole economy.
Market cap is simply the current marginal price × total shares outstanding. It assumes each share is worth the last traded price at the margin not that the entire company can be liquidated at once at that price.
The Banana Island analogy actually still fits if you frame it correctly: you’re not valuing the community as a single liquid asset, you’re just saying “if the last house sold at ₦500m, then that’s the market-clearing price signal for similar houses.”
The key distinction you’re missing is this:
Market cap = pricing reference at the margin
Not = total realizable cash if everything is sold simultaneously
So liquidity stress doesn’t invalidate market cap. it just explains why full exit at that price isn’t possible.

So in other words, you agree that you cannot realize that market cap easily in cash. Saying Dangote Cement has a trillion-naira market cap does not mean a trillion naira can actually be pulled out from it.

It can be one trillion today and, based on liquidity and other factors, become 200 billion at another time. That is why I said not to take market cap too seriously; I never canceled it like you claimed.

So the guy who said that because he has more than 45,000 birds and fish ponds, therefore his farm should be valued higher, is also wrong. Until liquidity, demand, and other market factors price the shares, the valuation remains theoretical.

By the way, I already know how to calculate market cap, but thanks all the same.

Itzlinda:
You’re mixing valuation with exit liquidity. You just described liquidity and tried to cancel market cap with it
Market cap is pricing at the margin, not “if everybody rush sell today”.

If everybody sell at once, even gold price go crash 😂


That’s like saying a house in Banana Island isn’t worth ₦500m because if every owner dumps houses at once, buyers go choke. That’s not how valuation works.

Plus, what is marginal liquidity? Can you simplify it?

Itzlinda:
You’re mixing valuation with exit liquidity. You just described liquidity and tried to cancel market cap with it
Market cap is pricing at the margin, not “if everybody rush sell today”.

If everybody sell at once, even gold price go crash 😂


That’s like saying a house in Banana Island isn’t worth ₦500m because if every owner dumps houses at once, buyers go choke. That’s not how valuation works.

Yeah, but all the houses on Banana Island are not grouped together and given a single value the way market capitalization is calculated. So I cannot say all the houses on Banana Island are worth ₦20 trillion and then use that number to compare it with Ikeja as an entire community. Or because two houses on Banana Island sold for ₦500 million, therefore we multiply that figure by the total number of houses on Banana Island. Do you get my point? Your example is not the relevant.

Read my other post and think about it.

Same with Dangote Cement. That trillion-naira market cap, do you think you can actually realize that much if everyone decided to sell? You would be surprised that the market may not absorb more than ₦200 billion, lol.

The only way that kind of money can realistically be realized is if a single entity is trying to acquire the whole company. If individuals are left to sell into the open market, you will not get anywhere near that trillion naira valuation.

So don’t take market capitalization too seriously.

rmx:
You should

Atimes you see things and just wonder , what is 45k birds -layers and growers with catfish pond and acres of palm , so many of this medium size poultry exist in oyo state alone , not even talking of the entire southwest , the poultry hotbed of nigeria , how do you justify 48b valuation with 700m revenue , like 60m monthly sales be that now , or it’s because it’s all forward looking , they have plans and they have palm , when no be tech coy , even the poultry sef they are not in other major lucrative aspects , anyway we are the architects of our individual fortunes ,nfa

That capitalization can be misleading. You only need to exchange a small number of shares out of all the outstanding shares at a certain price for it to affect the entire market capitalization. Less than 5% of the outstanding shares can be traded and still push the whole capitalization to tens of billions.

The funny thing is that even the so-called fundamentally strong stocks currently have market capitalizations many times their book value, thanks to only a small portion of the outstanding shares being traded. During a bear market, all of them can reset the same way, since prices are still being determined by trades involving only a fraction of the outstanding shares.

So when you say “48 billion,” the real question is: can you actually get that amount in cash if everyone tries to sell those shares?

Food for thought.

Agbalowomeri:
Are you not showing too much details online?

Don’t see any detail there.

Baba is backing his assertions with proof, trying to communicate that he runs this investment thing like a boss, if he talks, you listen, lol.

Yes, you are a boss in this business, but we can still contest what you said.

emmanuelewumi:
You remember Afroil.

A company that could not pay the rent at Ajao Estate and got quit notice 5 years earlier, got over 500% in capital during the bull era.

Afroil was in the down stream sector of NGX and was the cheapest in the sector at N1.00, after investors made money from Mobil, AP, Total etc they started using the profit to buy Afroil and the stock was on full bid for weeks.

At the end of the day, the stock crash and the business went into oblivion

But in this case, we’ve seen the financials, they’re available on the NGX portal. So we already know the current price is stretched. We have AI now; we can download the reports, upload them to DeepSeek, and have them broken down into very simple English.

Some of us still choose to participate anyway, that’s our decision. We don’t need you to break down financials for us; AI already does that very well.

If you’re against “looting,” then go and join Omoyele Sowore and leave our own “looting” for us. Habba!!!

Streetinvestor2:
I hope when efcc begin arrest the ceos of some of this companies. It won't have negative effect on ngx as dey wan join the frontier market. Look at the case of kpakus. The regulators have kept quite about the failure in disclosing insider dealings that happened. How about if some persons now equally decide same

I don’t know about that. If there was indeed insider dealing, you can report it to the authorities, that is, if you are sure of what you are saying.

To the best of my understanding, the rules require companies to publish audited financial statements because that is what informs investors. If a stock is trading at 200 times its book value, that is not a crime.

Itzlinda:
Problem is if people get burnt and run away, they will never come back. And the market turn to punish misallocation of capital.

That's exactly what happened in crypto. People gets tired of getting scammed and leave. And the whole market is not getting punished for capital misallocation.


Investing in quality stock that produce value improve the quality of the whole economy

That is not the case. Market capitalization and book value are two different things. As an investor, you should be guided by the book value shown in the financial statements.

The market capitalization of a stock is driven strictly by demand and supply. As long as money is flowing into it and sell pressure is lower than buy pressure, the price will rise. Unless the company is manipulating the market by withholding its financials, there is nothing inherently wrong with it.

A stock can trade at 100 times its book value; that is not a crime. If you do not do your homework, it is nobody’s fault.

Streetinvestor2:
So it now,if you see something say nothing. How will security if lives and properties improve for naija
I believe a new Nigeria is possible in my generation .lol

There is a difference between telling your followers that something is not right and continuously bashing a stock. Do you remember the Oando saga? For over two weeks, that was the only topic, how bad it was and all. Same with Ellah and many others.

Do you think the people investing in those stocks don’t understand valuation, especially now that even a child can value a stock accurately with AI?

Most of the money flowing into overvalued stocks is stolen funds anyway. It is almost a crime to prevent risk-taking people from recovering their own share of the Naija loot.

Pain in the ass, armchair analysts.

emmanuelewumi:
Dangote Cement with a better market history, pedigree, institutional investors etc should sell at a higher multiple na, but Zichis has a higher multiple.

Zichis has a Price Sale ratio of 71 compared to 4.5 by Dangote Cement

Zichis has a PE ratio of 150 compared to 15 by Dangote Cement

Zichis has a Price Book Value ratio of 40 compared to 8 by Dangote Cement

So you’re not happy that traders are running their ponzi schemes and cashing out? Sometimes we should just look away and let people do their thing. It doesn’t even look like the money flowing into it is hard-earned money anyway; at least some people would have cashed out from that “free money.” But now, you people have used bad belle to spoil it.

When Oando was doing its own, you people were here attacking it. When Ellah Lakes was pumping, you were here too. Now it’s Zichis. Invest in your fundamentally safe stocks and let gamblers do their thing for once. Just look away.

https://www.youtube.com/shorts/8KALkISFxDs

nairavsdollars:
If you have MTN shares, quickly sell. Oshiomhole just said on Arise tv that nationalization will happen

Who is Oshiomhole ?

mikeapollo:
You this man dey drag my blokos again this morning ooo?
You no allow me piss in peace, because you still hold my thing tight early in the morning!
I go report you to Wale and his uncle!
Be careful ooo. No be me spoil Nigeria. Seplat, Aradel dey sell for thousands, you no see that one. Na Oando be the problem?

Clear your debts that are draining your profits first. Did Oando Plc make any money last year if we exclude interest payments and other expenses? Just give a yes or no answer.

The Aradel and Seplat you are calling out all made profits. It’s like a not-so-clever student asking why his friends scored 70 and above while he failed the course. Is he putting in the same effort as his friends?

Streetinvestor2:
Make them stop at this junction oh make people no begin kpai anyone who says vote Tinubu for naija. The majority of Nigerians don't know what is driving the price of fuel for naija.Na you and I sabi say international crude price dey cause the thing
For many na Tinubu/apc dey cause the thing
And I no fit dey explain give them because it is helping our position to remove this failed government. At #1400 people are not finding it funny oh

Nigeria is not benefiting much because of the many forward oil sales and oil-backed loans the A.PC regime took in the past, and more loans are still being taken. People like Michael only care about Oando moving up, without minding that things are going to get tougher for ordinary Nigerians.

For the sake of the election, the government may bring back some form of subsidy if things get worse. Already, I think there is some subsidy on aviation fuel.

mikeapollo:
Abeg tell me when Wale and AIG go do me better!
Na that one dey worry me now

The hike we have experienced since the war started did not even shake Oando. That should tell you what to expect. Of course, I assume you can put two and two together.

It looks like the war between Iran and Israel/USA might start very soon. Oil prices have not even finished rising yet, more increase may still be coming.

Streetinvestor2:
But you been doubt person here on this trading matter. The audio no talk say he be trader.He is long time investor way dey always buy volume. His money too long
For traders I no dey doubt them

But it is possible that he trades on other foreign platforms and invests part of his gains in NGX. Some people hustle abroad and invest in the NGX. I don’t doubt anybody again, except you say you turned 3 million into 300 million in a stock that we all know did not appreciate by that much.

If you tell me you have been investing 5 million here, 10 million there over many years, and then say your stock portfolio is worth 1 billion, I won’t doubt it. Though, my doubt changes nothing, if you have it, you have it. It’s just my opinion.

Streetinvestor2:
Money na water. Audio Dangote of this thread. When people go be like u
When I grow I will be buying volumes of every stock mentioned here.God abeg oh
Kai you sabi lie

No dey doubt some things. Some people, trading na their full-time job. Dem still dey make pass some very hardworking people wey dey hustle for street. Some people think say na only when you comot go hustle you fit make money, e no be like that again. If you get skill, you fit siddon for house dey buy and sell stocks or even imaginary things, and still dey cash out big time.

mikeapollo:
Instead of you to help us talk to or deal with D. Trump by fire by force, you dey follow us drag NGX!
Is that good?

Talk is cheap. Make Trump and BB Netanyahu go take am if their mama born dem well, lol.

HesInMe:
Not gonna lie, I read the words twice and still really didn't get the point.

Me I just sabi buy good, buy low, sell high. Shikenan.

Price can move even without major news because aggressive buyers and available sellers can become imbalanced, and momentum can sustain that imbalance longer than you expect.

Streetinvestor2:
What will ever make the sell side dry up is the wahala. It has always been a challenge

I want to introduce you to the world of technical analysis. Maybe you will end up liking it more than ofe akwu and rice with assorted meat.

ACCESSCORP did over 2.4 billion naira in trades. That means some people wanted it so badly that they collectively spent over 2.4 billion naira buying it (buy side), while some other people did not want it for various reasons such as profit-taking, rotating into another stock, dumping, impatience, selling at a loss, converting inheritance to cash, buying land, paying for a burial, funding a wedding, paying debt, and many other reasons you can think of (sell side).

What is interesting is that these two sides are independent of each other, and nobody was forced to buy, although some sellers may have had their hands forced for one reason or another.

Now, assuming these buyers came in today wanting to buy, but there were very few sellers, what do you think would happen to the price? Yes, they would start buying at higher prices. It is also true that many people would refuse to buy if they do not have a strong reason, but the buyers who are willing to buy will still push the price higher because the few sellers available will immediately sense the imbalance.

So my point is that a stock does not move because of news or fundamentals alone. Sometimes imbalance alone can move it. The funny thing is that most people do not even care what is moving it. What they want to see is motion, and once they see motion, they start buying until the sell side comes back with heavy supply.

The end.