[100 Challenge] DanJi’s reading note_67

How Start-ups Become Unicorns
A Record of the Rise and Fall of Hyperrealist Start-ups
Author Choi Jungwoo
Publishing teachers and parkers
Issued on April 16, 2020.

It was in 2000. KOSDAQ-listed shares rose 181 times in just five months, an unprecedented event. The main character is Ritower Tech, and the character is Choi Yoo-shin, a financial expert from Harvard University. Choi, a businessman in his early 30s, acquired Power Tech, a boiler blower maker, changed his name to Ritower Tech, and began to acquire over-the-counter ventures. He used a method of exchanging company stock shares with Ritower Tech. This method is called A&DA Acquisition & Development, which was rarely seen in the Korean market then. Choi was praised as an innovative manager.
Although many companies attracted investment and increased corporate value through traffic alone in the Internet bubble era, Ritowertech has shown a scarier growth trend than any other company. Its market capitalization rose from 7 billion won in January 2001 to 1.2 trillion won in August. The problem is that it attempted to manipulate the stock price as a boon to the company's acquisition. Due to the bubble burst and suspicions of stock price manipulation, Ritowertech's stock price fell sharply. It was natural that investors who believed in Choi Yushin and the shareholders of Ritowertech's acquired company suffered tremendous damage. In a way, the Ritowertech incident was one of the numerous incidents created by the moral hazard of entrepreneurs and investors during the bubble period. With the advent of Yellow Mobile, this incident was summoned to the market again. Ritowertech and Yellow Mobile were similar in conducting M&A through the stock exchange.
Was that why? My evaluation of Yellow Mobile was quite negative. My experience had some influence on this. However, I couldn't rule out the possibility of losing objectivity and making a wrong decision because of my nightmarish experience. It was challenging to say that the two companies were 100% the same when I looked at them calmly. The Ritower Tech case was an apparent "fraud" of stock price manipulation. But isn't Yellow Mobile buying acquired companies with its ability? (It wasn't easy to know where and how they raised funds based on search information, but I decided they had enough room!) In particular, Yellow Mobile dealt with venture capital VC, an industry expert, not an information-poor individual investor like Ritower Tech. VC is not a very easy thing to do. It was clear that they had done considerable research to verify the risk. Passing their verification would mean that they are that competent.
Since we sold our Churose, I have constantly sought new opportunities. Did I get a yellow mobile before me? And it wasn't a chance to grind myself out for a small fortune.
Before discussing how to evaluate corporate value, let's first explain the corporate value. Corporate value is often understood as the company's stock value, 'share price × total number of shares', but the original corporate value is not set only by the stock value. Total enterprise value is the sum of stock value and debt value, a concept different from stock value and equity value. However, since it is expected to mix corporate value with stock value, the corporate value we are discussing is defined as stock value, and the story will continue.
There are two main ways to evaluate corporate value. First, it is the first method. A company is an organism that makes profits, and the end product of this organism is profit. It is also why a company exists to create profits by producing and selling products. Assuming corporate profits are continuously generated this way, the amount that evaluates future profits at present value becomes the corporate value.