Book 28. For emerging companies like those on social media, most of their value lies in their brand, making it an interesting strategy to sell them at a price far below their actual share price.

Hello, this is Beta. The current investment environment (March 27, 2026) is excellent, with the Nikkei Stock Average rising and reaching a new all-time high. My previous article suggested that the investment environment might be outdated, but this article will discuss what you should invest in.

When you start a company and take it public, you can aim for profits from selling the shares by making them available on the market. If you own a majority of the shares, you have the right to dissolve the company through voting rights, and you can make decisions regarding the disposal of assets.

I know that in traditional business practices, owning a majority of shares and circulating a large number of those shares on the market allows for significant capital gains, or profits from selling. In this act of holding shares, the company as an asset definitely exists, and then the goodwill of the brand is added to it.

Owning shares in a company means you own a portion of that company's assets through your share allocation. For example, if a company has a building worth 10 billion yen, that asset is included in the market capitalization of the company's shares.

Now, consider the case of an industrial company going public. The company's owner owns a majority of the shares and releases the remaining shares onto the market. In return, they receive a large profit from the sale.

This raises a question. What if the shares traded on this market were sold not at their market value, but at a price far below half of that value? In the case of an industrial company, the portion sold at a price lower than the market value probably doesn't include much goodwill, which is the brand, but rather is likely compensated for by fixed assets such as factories, equipment, and buildings.

In other words, in industrial companies with little goodwill, selling shares at a price lower than the actual share price is treated the same as transferring actual fixed assets to the buyer free of charge.

On the other hand, for companies with high goodwill, such as IT companies, selling shares at a price lower than the actual share price may attract many buyers. This is because the portion of the shares sold at a price far below the actual share price is mostly goodwill and brand value.

For a popular company, if the goodwill portion—for example, the brand value is 10 billion yen and fixed assets such as buildings are also 10 billion yen—it would be interesting to try selling all of the shares, which have a market capitalization of 20 billion yen, for 10 billion yen instead of 20 billion yen.

For emerging companies like those in the social media space industry, the majority of their value lies in their brand and goodwill, so selling their shares at a price far below their actual share price would be an interesting experiment. For example, if you own 100% of the shares and sell 70% for next to nothing, the shares will be offered at a price far below their actual share price, which should attract many buyers.

If they retained their 30%, and the stock price surged by more than 3.3 times, their total shareholding would exceed the original market capitalization. Even the 70% of shares they sold for next to nothing would generate significant surplus profits if the proceeds from the sale were considered part of the company's cash flow. For a social media company, that 70% of shares might be almost entirely brand value. (To be continued)