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Anonymous

18 Apr 2019

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Many bank stocks trade with a price-to-book ratio below 1, why are companies with a low P/B ratio not acquired immediately?

For my example I'll say it's share price is $.60 per $1 in net assets. Let's say there's 100 shares outstanding. Wouldn't this mean I could buy the company for $60, and then sell off all its net assets for $100? If this is the case, why would any company with a p/b ratio below 1 not be immediately acquired?

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TUBInvesting

08 Mar 2019

Finance at Singapore Management University

This is because as some people stated, there is a reason they are trading below their book value.

This could be for example, lower growth expected in future, negative earnings, significant debt, etc.

In addition, if you are looking a liquidation value, you can never have a fire sale on something and expect the value to be realised.

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