Set out the different definitions of value and argue which one fits the valuation of a listed company best
The idea
Several standards of value exist and they answer different questions. Fair market value is the price an informed, willing buyer and seller would agree with neither under compulsion. Fair value in financial reporting is an exit price in an orderly transaction between market participants. Investment value is the worth to one particular buyer, and exceeds market value when that buyer expects synergies. Intrinsic value is the analyst's estimate of true worth from fundamentals. For an analyst advising investors in listed shares, intrinsic value is the relevant standard, because the aim is to find shares priced away from their fundamentals. A common error is treating an acquirer's investment value, which includes buyer-specific synergies, as the price at which the shares ought to trade.
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