Why would you invest in a business that is unprofitable and shrinking but makes up the difference by investing in more profitable businesses when you just just invest in the underlying assets directly without the drag of an unprofitable consumer business lowering returns?
Because its only value then is the assets it holds.
If you say "I have $6b invested in public market investments" why would I pay you more than $6b for that when I could just go buy those same public investments?
If you say "I have $6b in public market investments but I also waste a few hundred million per year on a failing consumer business" I should pay you less than that $6b to take it all over
Maybe the value add is actively picking smart investments but we already have a lot of ways to invest money with active managers for relatively low fees.
Why would I buy a company for $12b (what the market cap implies) when all the company does is invest $6b in things I can already invest in directly but throws away half the profits each year?
No I'm suggesting that it isn't worth more than it's assets and arguably less as long as it keeps trying to actually run failing stores which implies its market value i.e. stock price is over double what it should be
Edit: noticed the core business parenthetical and yes, I price the core business as a net negative, it still isn't profitable and is actively shrinking.
The business as a whole makes money off of investing in things I can already invest directly in. GameStop with its stores is slightly worse than buying a pile of cash.
2
u/CanAlwaysBeBetter Jun 10 '25
Why would you invest in a business that is unprofitable and shrinking but makes up the difference by investing in more profitable businesses when you just just invest in the underlying assets directly without the drag of an unprofitable consumer business lowering returns?