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Michael Dell Bought His Company Too Cheaply - Bloomberg

If you own a stock that you think is worth $10 a share, and I also own that stock and I think it's worth $20 a share, I can try to convince you that I'm right. I can make predictions about the company's future prospects and earnings, and build a discounted cash flow model to prove that the stock really is worth $20. And you can make different assumptions about the future, and build different models, and try to convince me that $10 is the right number. But this is all kind of dumb. I should just pay you $12 for your shares. Then you get paid more than you think the stock is worth, and I get stock that I think is worth more than I paid, and we never have to discuss it. This is called the efficient markets hypothesis. 1