Paper Millionaire
Categories: Company Valuation
Here's a trick: get one of your friends to pay you $20 to buy one share of common stock in your company, which has 100,000 shares outstanding. By giving you that $20, your friend has valued your company in total as being worth $2 million. You are now a paper multi-millionaire. Well, like $1.99999 millionaire, or something like that.
And that's what a paper millioniare is. On paper, you're worth a million bucks or more.
But are you really worth that million? It's just paper. It's not a public company that you can sell right away on Schwab or Fidelity. It's private. So it sits there, notionally feeling good...but with no real hope of near-term liquidity any time soon.
