Pulling Rabbits Out of Hats in the Oil Business - and Elsewhere
4 Pages Posted: 15 Feb 2018
Date Written: February 4, 1982
The prices recently offered for Conoco and Marathon Oil clearly astounded many market observers. Where did these figures - 10, 20, 30 per cent over prevailing market values - come from? Had the managements of Dome Petroleum, Mobil, Du Pont et al. deserted their calculators for magic wands? Were they pulling the numbers out of their hats?
Are companies acting irrationally when they pay seemingly excessive prices to acquire other companies? Not necessarily. When tax deductions such as depreciation can be increased, it is sometimes possible to gain at the government's expense. Perhaps this is what has been happening in the oil industry.
Keywords: stock valuation, security analysis, accounting standards, stock selection, portfolio selection
JEL Classification: G00, G10, G11, G12, G14
Suggested Citation: Suggested Citation