Subject: Re: SIRI
Mungofitch:
Fun thought experiment: Say Mr Buffett completely retires next year and never again mentions Berkshire in public. He has time on his hands, so he launches a SPAC at $10 per share with (as legally required) no deal arranged. What would it trade at?

I've got lots of thoughts on your statements about valuing cash in company valuations. I think it is likely to be valued at face value by the people who buy the stock, but unlike you, I don't think stock valuations are the "median of all the estimates of financial types looking at it" (I paraphrase perhaps poorly but how I got the gist). I think stock prices are set by a dutch auction. For smallish investments, most financially competent types have not decided to learn enough about it to have any opinion at all and so would reasonably be described as estimating a price of $0 required to lure them in. But of the small number of financial types, you will have a range of opinions on what the stock is worth. A Dutch auction I belive is one where all those who want to bid put a bid in, and the price is set at the highest price that would still sell all the items for sale. And then everybody who bid that price OR HIGHER gets the item at the same low price no matter how much more they bid then lowest bidder who also gets the item.

SO really, the vast majority of analysts may think the thing is overpriced, but if they minority of analysts who like the stock best are there with enough money, THEY get to set the price.

As to how much would I expect a SPAC launched by Buffett to trade at? Well if that SPAC had a total capitalization $100 million or less I would expect it to be WORTH at least $200 million and I would be a very enthusiastic buyer if it traded as low as $15 for a share representing $10 of the cash Buffett had in the SPAC to trade. If Buffett were a young man, say 80 or less, I would likely be considering it at $19 a share. But I would expect it to trade above $20 and I would watch from the sidelines the way I did when Google when public.

If the SPAC were much larger, say $100 billion, I might expect it to trade as low as $13 to $15 a share. Both because Buffett will make a lower return on that much more money and because the dutch auction is now reaching much further into the pool of financial analysts/investors who are willing to bid.

And to in some sense prove it is not just the median valuation, if the SPAC had $100 Trillion in it, I would expect it to trade at, I dunno, maybe $3 per share. Or at least that's about what I would pay for it. And if it were trading for $100,000 Trillion, It would be pennies on the dollar, simply because there wouldn't be enough money in the world to buy the shares up otherwise.

What do you think it would trade at?

R:)