We do, of course, realize that no rational investor would be willing to risk money investing in our farm. Furthermore, if an investor were to give an offer price, it would likely be well below true economic value. However, this is the same dilemma that faces high technology investors on a daily basis. Most investors agree that the economic value of any asset is basically the present value of all future cash flows discounted back by the appropriate discount rate. The discount rate that is chosen is a function of the risk inherent in the investment.
Uncertainty is risk.
Therefore, a lack of information is accounted for by increasing the risk premium, which increases the discount rate, and subsequently reduces the economic value of the entity. This concept is not supported merely by our simple farm example. If there's anything really lacking in that respect, we would truly appreciate hearing from you because we want to have that kind of information in the report. There are two reasons why managers consistently cling to the belief that the market does not fairly price their shares. The first and most obvious reason is that managers know more about their businesses than the market does and thus arrive at a different, often higher, value for their company's shares.