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Comment by eloff | Hacker News Reader

Also the reason the stock jumped on the news is the company is potentially worth more this way, by breaking out higher margin / faster growth units from the big retail business. A lot of Amazon investors would love to see the same with AWS.

It sounds silly since nothing really changes, but it has to do with the way investors calculate the value of public companies.

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Yeah I saw this happen with a business I was involved with.

Split up each business could be valued with direct competition in market and the same PE ratios applied to evaluate value and market cap. It caused a noticeable jump in overall stock value while nothing actually changed other than how businesses reported to the market.

Does this mean it was undervalued beforehand? Are companies in the “before” scenario generally undervalued?

This sounds good in theory but might not work in practice. None of them are profitable and depended on Tmall/Taobao for growth. Turning to the public markets would require sacrificing growth for profitability. There might be many other inter dependencies which might turn out costly to unwind.

What you are saying might be how it turns out in the end, but it is not a given.

Yes, nothing is a given when it comes to the stock market.

Endless growth of unprofitable services is what has given us crazy market distortions in the past. It's what gave us things like Groupon, Doordash, and Uber, too. Growth isn't always a good goal.

a basket of options is more valuable than an option on a basket

https://medium.com/@kentbeck_7670/decisions-decisions-or-why...

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