Evaluated

I saw a social media post today claiming that Alphabet was now "worth $4.8 trillion." Considering that I didn't see any reporting on that anywhere, I'm dubious about that number, but it started me thinking. Just how does one determine how much a company is "worth."

After all, it wouldn't be possible to simply hand over $4.8 trillion and just own Alphabet... if a significant number of shareholders were all looking to proactively sell, the price would immediately drop. Likewise, if someone (or an organization) with a remarkable amount of liquidity decided to buy up a significant portion of the shares, the price would rise. Stock prices are generally set between buyers and sellers, and valuations are generally determined on the basis of some average of the transactions that take place over a given timeframe. So, at least as far as I'm concerned, the statement that "a given company is worth some number of dollars," doesn't really tell us anything.

Except, maybe, about investors. It occurs to me that to value a company is to presume that it's possible (at least in theory) for all of the shares to change hands over a reasonable span of time. Leaving aside for a moment the changes in share price that such a shift would bring about, any valuation implies that some amount of money is currently tied up in the company's stock. Some of it can be thought of as not being "real," since it doesn't matter how long the stock has been held by it current owner; if it hasn't been sold recently, and isn't currently for sale, no-one has to actually produce the money to buy it... but the owner is credited as having grown wealthier all the same.

And that wealth is counted just like money in the bank would be. A lot is made of wealth inequality, but it's rare to hear about how much of that wealth is represented simply in terms of an expectation that, if someone were to sell something, they would be able to receive a certain amount of money for it. But if all of these expectations were added together, how would that compare to the amounts of hard currency there is? Could people actually buy all of these companies at their stated valuations? Or do expectations represent the bulk of modern money supplies?