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If a company's assets are worth more than its market cap, can one say the shares must be undervalued?
You haven't mentioned how much debt your example company has. Rarely does a company not carry any kind of debt (credit facilities, outstanding bonds or debentures, accounts payable, etc.) Might it owe, for instance, $1B in outstanding loans or bonds? Looking at debt too is critically important if you want to conduct the kind of analysis you're talking about.  Consider that the fundamental accounting equation says: or, But in your example you're assuming the assets and equity ought to be equal, discounting the possibility of debt.  Debt changes everything.  You need to look at the value of the net assets of the company (i.e. subtracting the debt), not just the value of its assets alone. Shareholders are residual claimants on the assets of the company, i.e. after all debt claims have been satisfied.  This means the government (taxes owed), the bank (loans to repay), and bondholders are due their payback before determining what is leftover for the shareholders.