Book Value v. Market Value

A company may carry a different value on it's books than it would on a sale. Most publically traded companies have a higher market capitalization then GAAP Equity. Accounting does not capture the value of intangibles which might contribute to future profitability until a company is sold and the aquiring company puts up an asset called 'goodwill' which represents the future value the purchaser placed on the company by virtue of the fact that they paid more than book value for the company.

My company could hold a valuable patent, but its books won't record the value of the future income from that patent, only the cost of aquiring it. My company might also not produce a profit because I have a high expense ratio. Another company might value my company as the presevt value of the patent fees assuming they could fire all my employees and administer the patent using their existing staff. Their value for the company is markedly different from the book value.

Roy, I do understand that, as a theoretical proposition, a company with negative book value may have assets worth buying. But in this specific situation, the reasoning escapes me. N2H2 doesn't have any valuable patents or special expertise, nothing worth terribly much. The marketing might be worth something - but nearly TWENTY MILLION DOLLARS??? Where is the value here?