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Look, I totally get the debt part of the valuation, and what enterprise value is. I also completely understand that enterprise value is an important measure of valuation. All I'm saying is that using market cap to indicate the value of the company is not that misleading either. Enterprise value is just one way to value a business, there are others. It's not precise science.

So in your latest example, and also throughout the thread, you're confusing (or using interchangeably) the concrete sale price and a fuzzy intrinsic value. Why would the buyer of your business pay $300K upfront? All other things being equal, the sale price of the business would still be $60k, and they can be paying off debt for the next 15 years for all I know. The conventional media-reported value of the business would still be $60K, and it won't be very misleading.

In addition, not all debt is created equal. A company like Google can probably easily get, say 1B of super cheap debt on favorable terms, while something like Barnes & Noble would barely get the same 1B at much higher interest rates and repayment schedules. It's still 1B in enterprise value, but it's clearly not the same debt.

You also mentioned cash flows. So to continue with your example, if your business is actually losing money hand over fist, and has negative cash flow on top of $240K of debt, what do you think its value would be? Would it be equal to your simple enterprise value formula? What if the same business is growing at 100% per quarter with super high operating margins? Enterprise value can be just as misleading.




To make Times worth about a billion dollars (it's market cap), you need to believe that that $700M+ of debt is totally worthless to the debt holders. That isn't some fuzzy detail. It's a fundamental concept that the author of this article ignores (or doesn't understand).

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Not totally worthless, but most likely not worth the full $700M. They have $2.2B in Plant/Property/Equipment on their balance sheet. Then they have $500M+ of goodwill and intangibles. And only $500M of equity, which is constantly declining quarter after quarter. One stupid move, and the equity is easily wiped out, leaving debtholders with goodwill and a bunch of newspaper printing equipment.

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