Narrative and Numbers: The Value of Stories in Business (Columbia Business School Publishing)

by Aswath Damodaran

largely on how investors in the market classify a company. Thus, if Tesla is being treated by investors as a tech company and not an automobile company, the pricing may very well have to do the same. 2. Look for the pricing metric that investors use in pricing these companies: When pricing companies, it is not your place or mine to determine what investors should be using to price companies, but what they actually are using. Thus, if the metric investors focus on when pricing social media companies is the number of users these companies have, you should focus on that metric in pricing your company. 3. Price your company: Now that you have the metric or metrics that investors are using to price companies, you can price your company based on that metric and the pricing ratios across the comparable companies. Using the social media example again, if social media companies are being priced based on users, and the average price that the market was paying was $100/user in 2013, you would have priced Twitter, which had 240 million users in October 2013, at approximately $24 billion.