Post First Published: 1/01/2022 Post Updated: 27/08/2022 7:03 PM
Nov 16, 2014,06:36am EST
It might seem a little odd that one single company….
Is Now worth more than the entire publicly traded market of a major economy. But that’s what has happened to Apple just recently: that one single firm is now worth more than the entirety of the Russian stock market. However, this isn’t so much a story about how wonderfully Apple is doing (the valuation of Apple is still quite low going by the traditional numbers like EPS and so on), rather, it’s more of a story about how appallingly bad Russian public policy is.
Here’s the Telegraph commenting upon it:
Apple is now worth more than Russia’s stock market, new data have revealed.
The US technology giant’s market capitalisation has overtaken the combined value of all Russian public companies for the first time in history, Bloomberg reported.
Apple, the world’s most valuable company, has added $147bn to its market cap this year and was worth $652bn as of November 12. The shares closed up 1.2pc to $114.18 each on Friday.
Russian equities have fallen $234bn to $531bn in the same period, Bloomberg data stated.
Bloomberg, the originators of the calculation, go rather further. You’d actually have enough money left over to buy every Russian an iPhone as well:
If you owned Apple Inc. (AAPL), and sold it, you could purchase the entire stock market of Russia, and still have enough change to buy every Russian an iPhone 6 Plus.
The CHART OF THE DAY shows the total market capitalization of all public companies in the world’s largest country slipped below that of the world’s most-valued company for the first time on record. The gap, at $121 billion on Nov. 12, is about the price of 143 million contract-free 64-gigabyte iPhones, based on Apple Store prices.
It’s definitely a fun number but as I say it’s not really about how much we’re all valuing Apple at. Sure, the company is incredibly successful and it is the world’s most valuable publicly traded company. But given the profits it is making it’s not valued particularly highly by the normal methods we might use to judge company valuations. The p/we ratio most certainly isn’t excessive and so on.
No, what this comparison really shows us is how badly the Russian economy is doing. And there’s both macroeconomic and microeconomic reasons for this.
The macroeconomic ones are that the country is hugely dependent upon oil and gas exports: and so also is the government budget. Those prices have fallen recently and thus so has the currency and the government budget just isn’t going to anywhere near balance at these numbers. Add to that the way in which many Russian companies have substantial debts denominated in foreign currency (those debts become more difficult to repay as the ruble plunges) and we’ve got everyone thinking that those companies really aren’t worth very much.
However, there’s also the microeconomic effects of what we might call Putinism. Property rights, especially in those oil and gas firms, don’t seem all that secure. Who owns what is not something that seems all that fixed in law: Yukos and more recently Bashneft, and of course the various tribulations of BP over TNK, all lead to no one being quite certain that they do own what pieces of paper say they should own.
Meaning, of course, that share prices, the valuations put on those pieces of paper that allocate at least nominal ownership, aren’t very high. Add in what the Streetwise Professor calls “tunnelling“, whereby insiders profit at the expense of the nominal owners of the business, those shareholders again, and we can understand why a $1 of profits in Russia is valued at a rather lower capital value than a $1 of profits in the US.
Yes, it is true and it’s also a fun number that Apple is now worth more than the entire quoted Russian stock market. But that’s not so much a reflection of how well Apple is being run as it is a signal of how appallingly the Russian economy is being run.
God Speed 8