(Update: Mike Bloomberg delivered a speech at the Democratic National Convention in Philadelphia where he praised Hillary Clinton's leadership and assailed Donald Trump's business acumen, calling him a "dangerous demagogue." This post originally appeared in January when Bloomberg was considering a run for the presidency, but his net worth still underscores a key credential Trump considers the most important -- wealth.)
Forbes says Mike Bloomberg is worth $35.6 billion. Donald Trump says it can’t be that much. They’re both wrong. Here’s the real number: $48.8 billion.
Why should anyone care? The game of how much billionaires are worth is an often silly exercise that nonetheless matters a great deal to the absurdly wealthy, even when it typically involves irrationally large sums that have little practical day-to-day value.
Still, it’s fun to play along, especially when it involves Bloomberg, who is considering a possible presidential bid to topple Trump, the reality TV star who may or may not be worth quite as much as he claims. Also, tech people love the idea of a Bloomberg bid, so it’s worth taking a closer look at how much he’s got.
Forbes’ estimate of Bloomberg’s wealth makes him the eleventh-richest person in the world and the the sixth-richest technology executive behind Bill Gates, Jeff Bezos, Larry Ellison, Mark Zuckerberg and Larry Page. (That ranking, by the way, changes daily. It’s not hard to imagine who might want to check it regularly.)
Based on our calculation, $48.8 billion would bump Bloomberg up the Forbes list to fifth, ahead of Zuckerberg and Page. Spokespeople for Bloomberg declined to comment.
Our number is different because the Forbes ranking is based on a 2013 analysis of Bloomberg’s company, Bloomberg LP. We updated the estimate with our own reporting and a slightly different, I think better, analysis. Disclosure: I was a media reporter for Bloomberg News from 2011 to 2014.
The former New York City mayor’s wealth is almost entirely sewn up in his company, which means he’s worth whatever his company is worth, or what someone might be willing to pay for it. Bankers can do this calculation fairly easily with the proper data, but Bloomberg LP is privately held, so it’s tricky.
Last year, the company generated about $9 billion in sales, and its profit margin tends to hover around 40 percent, according to sources. For those unfamiliar with Bloomberg’s business, the company leases software that connects Wall Street traders to market data and, more importantly, to each other, at $21,000 a year. Think of it as one massive Slack channel filled with hedge fund managers, bond and currency traders, wealth managers and CFOs, all from different firms.
That makes it an enviably profitable business, and Bloomberg owns 88 percent of it. Another salient detail: The former mayor has held about $5 billion in cash, of which he has spent $3.7 billion in charitable giving, leaving him with at least $1.3 billion lying around.
So what would anyone pay for Bloomberg LP? To figure that out, we have to look at comparable businesses, ideally ones that have recently sold, or, short of that, ones that are publicly traded.
We’re in some luck since the two companies most like Bloomberg LP are publicly traded: FactSet and Thomson Reuters. To be clear, neither are exactly like Bloomberg, but since they often compete for the same customers — bankers and analysts — they offer fair comparisons.
FactSet trades at about 16.5 times its profit. Thomson Reuters trades at about 13.9 times profit. Taking the midway point between those two would make Bloomberg LP worth about 15 times profit. (For the persnickety: Those multiples refer to the companies’ enterprise value divided by their Ebitda profit, a good way to determine a takeover price.)
Bloomberg LP’s profit margin would give it about $3.6 billion before taxes, translating to a sticker price of $54 billion. At 88 percent ownership, Bloomberg the man would stand to gain $47.5 billion. But let’s not forget that $1.3 billion lying around, which brings up his total worth to $48.8 billion.
Astoundingly, that still doesn’t include the nearly dozen properties he owns across the globe, including in Manhattan, Bermuda, London and Southhampton, or his various helicopters and jets. If we’re being generous, we could round it up to a cool $50 billion, but since he is a billionaire (48 times over), we don’t feel the need to bestow that particular charity.
Some perspective on this number (and really any billionaire’s ranking): This is a theoretical value. Bloomberg isn’t selling his business anytime soon, and he’s certainly not going to borrow against that value. Almost any determination of a rich person’s worth looks at what they’d be left with if they sold everything, which none of them will do. That’s what we mean about little practical value.
But there is most definitely a perceived value, which is why rich people can get prickly over these rankings. We’re not saying our evaluation is definitive, but then no estimate of any billionaire really is. Bloomberg himself has bristled at his ranking, once telling a reporter, "Look, the numbers in these things are always suspect," after seeing how Forbes calculated his wealth in 2013.
Ironically, Bloomberg News, which has its own billionaires list, doesn’t include him at all. That’s because it stands by a very strict reading of the journalist’s code to not write about one’s own company, or the person who owns that company. It certainly can make it weird for media reporters who work at Bloomberg News.
This article originally appeared on Recode.net.