12 pieces
Companies go private when the people closest to the cash decide a public quote no longer earns its cost. The buyout price that follows is built on free cash flow, not on yesterday's close.
Brand dilution is what happens when a name is spread across so many products and uncontrolled channels that it stops commanding a premium. Gucci's 1990s recovery came mostly from subtraction, not design.
A quality of earnings report tests whether reported profit is real, repeatable and collected in cash. It protects a buyer only while the findings can still change the price, as Caterpillar's Siwei write-off showed.
Rollover equity in a sale is ownership kept beside the buyer rather than cash at closing. It is worth its headline number only when the security, the forced-sale rights and the tax form all match.
Segment reporting is read by setting the company-wide totals aside for the note that splits a business into its parts, then asking of each part how fast it grows, what margin it keeps, and which costs were left out.
Cash settles a sale; stock turns it into an investment in the buyer. Instagram's $1 billion closed nearer $715 million because the share count was fixed and the price was not.
Adjusted EBITDA is profit with selected costs removed, and no rulebook says which ones. It is fair when those costs will not return, and misleading when they are the cash a business must spend to stay open.
A valuation drop is only a bargain when the previous owner, not the market, caused it and the buyer already knows how to run the machine. Snapple's collapse and recovery show how to tell the difference.
Stock buybacks are good for the shareholders who stay only when a company pays less for its shares than the business is worth. A buyback is a purchase, and a purchase is only as good as its price.
An earnout is deferred purchase price, not a bonus: the later payment depends on targets the buyer usually controls. Sellers should value the certain part of a deal as if the deferred part were zero.
Revenue that never converts into repeatable, owner-controlled cash is a story rather than growth. Three plain questions separate the businesses whose cash actually compounds from the ones with a good chart.
SpaceX went public at more than a $2 trillion valuation on its first day of trading — and whether it is a great company and whether it is a great investment at that price are two entirely different questions, with a disciplined way to tell them apart.