WeWork valued at $47 billion last year is now worth $2.9 billion.
Yahoo once valued at over $100 billion during peak times sold their core business to Verizon at $4.8 billion a couple of years ago.
In United States alone, the 2008 financial crisis wiped out nearly $8 trillion in value between 2007 and 2009.
Valuations are misleading. They are simply an estimate. More accurate in some cases than others. More often than not they are focused around the interests of a handful of shareholders and don’t always represent the true health of the business (or the asset).
Valuations create a bubble not only for the ‘highly valued’ groups but also for the market and the common person. “Everyone is getting their startup funded by investors, so should we.” Or “Just because everyone’s house is going up in price, may be I should buy it too.” The focus on fundamentals of building a business (or savings) takes a back seat.
It is important to remember that valuations rely on investor’s perceived value of the asset. They are at best an estimate, relevant for a moment in time.