Let's say I start a new company with a trillion shares.
I then get my friend to invest a dollar in it in exchange for one share.
Two questions pop to mind:
What, if anything, prevents me from legitimately claiming the company is worth a trillion dollars?
If I can legitimately claim this, then why should we believe real-world (non-public) company valuations aren't similarly nonsensical?
Nothing, you can claim whatever you want. But if you try to collateralize the remaining shares, of sell them to someone who's not your friend - they'd want to conduct a proper valuation. A proper valuation will be using accounting principles and based on independently audited financial statements you'd have to provide.
Without proper accounting and audit - yes, these claims are not very useful.
