The overall value [Enterprize Value] of a company is the combination of its Equity [Assets less Liabilities] with a bit of input from Stock Value in Market Capitalization.
Market Capitalization [Stock Price multiplied by Share Number] helps to lower/raise the physical Equity.

Presently, Toyota Motor Corp leads the world in overall Enterprize Value, because its equity is $185 billion and its stock market market cap is around $200 billion.
The market cap will help to lower/raise the overall Enterprize Value which is based primarily on the equity at $185 billion.
Stock market market cap is not the actual value of a company.
Stock market market cap shows how well the stock is performing on the stock market.
Stock market performance helps add value to a company.
Toyota Motor Corp will NOT sell for $185B equity + $200B stock market market cap for a total of $385B in overall Enterprize Value; that's not how it works.

Tesla's equity [assets less liabilities] is $6.61B, while its stock market value market cap is $100B, so that Tesla's stock market market cap will help to raise the overall Enterprize Value of Tesla.


This Tesla Killer business?
The road ahead is long. Too early to tell. These are only early days yet. Anything can happen.
For example, Model S was boasting 29k units/year a few years ago, but now down to just 14k.
Likewise, Model X dropped from 26k to just 19k.
Sure Model 3 158k last year, but too early to tell. Will be interesting to see how well Model 3 sells this year. January figures should be released sometime next week.
.

 

I'm sorry but you're view of valuation is confusing at best. Enterprise value is the actual value of the company should it be acquired. The definition of Enterprise Value (EV) = Market Cap (fair value of equity) + Total Debt - Cash. The fair value of equity is the market cap. MOST of the value for companies comes from Market Cap (or stock price x fully diluted shares outstanding). The balance sheet items (net of cash/debt) have already been accounted for in the market cap which really is a discounted cash flow analysis for the future prospects of the company. Its really simple

 

Traditionally, we have the equity value of a business, as the assets less the liabilities like Toyota Motor Corp's $185 billion and Tesla's $6.61 billion.
When a company is actually sold/purchased, it is actually less/more than the true equity price alone - it also depends on stock performance - if stock performance is high, then the company will sell for more.

With the stock market and shareholders, we now have market capitalisation which is the share price multiplied by the total number of shares to give Tesla's $100 billion, or Toyota's $200 billion.
With the stockmarket and shareholders, there is now a "theoretical" notion that a company is sold/purchased by selling/buying all the shares multiplied by the share price = Market Capitalization price!
Rather than Market Capitalization alone, we try to use a more accurate formula called Enterprize Value = Market Cap + Total Debt - Cash, thereby taking into account cash reserves and loans.
However, in truth a company will not really sell based on the stockmarket driven Enterprize Value alone.
Enterprize Value is just a more accurate version of Market Capitalization.

A business won't actually sell based on true equity value alone, especially if it is a public company trading on the stockmarket.
However, a business won't sell based on stockmarket market cap and enterprize value alone either.
It is a combination of both true equity value and stockmarket value via market caps/enterprize value.
A business will actually sell based on multiple factors including supply/demand.

Working from the true equity value as a base, high Market Capitalization and high Enterprize Value tends to overvalue the business adding value to the sale price, while the opposite undervalues the business reducing its sale price.
.

 

What you wrote here is VERY different than what you wrote above 2 posts ago. Haha. At least here, you accurately describe the relationship between enterprise value and market cap

 

As the stock market fluctuates, share prices, hence Market Caps & Enterprize Value will go up and down by the minute.
For example, middle of last year, Tesla shares trading for only something like $176 each!

Hence equity is the more realistic & stable backbone value, with share prices, market caps & enterprize value fluctuations by the minute only giving a helping hand.

By comparing market cap or enterprize value with equity, the stock market is able to determine whether a stock is undervalued or overvalued, and this in turn influences their decision to trade [buy/sell] stocks.

When market capitalization is higher than equity, the stock is said to be overvalued, cautioning the purchase of more stocks at the higher value.
Meanwhile when market capitalization is lower than the equity, the stock is said to be undervalued encouraging greater purchase in stocks.

Stock value, market capitalization and enterprize value is more to do with the stockmarket and share trading.
Equity is more relevant to the day to day sales, purchases and borrowings of a company, for example, Toyota Motor Corp may want to sell off all of their manufacturing facilities in the US for x amount, or they may wish to borrow x amount from the bank.

Neither maket cap nor enterprize value will be what a corporation actually sells for.
The sale price will be based on a backbone in equity, influenced by stockmarket performance, plus the addition of other factors like supply and demand.

The overall value is an interplay between real stable equity and stock values that fluctuate by the minute with the former being the backbone, while the latter fluctuates...
.

 

I have to disagree. I've been an M&A finance professional for most of my career and have bought numerous public companies. Companies are valued on the assumption that they have an underlying cash flow in the future. Volatility is simply that assumption changing due to external / internal factors. Some stocks are more volatile because those factors have a bigger impact than a less volatile company. Stock is the equity value of the company. You keep saying market cap needs to be compared with equity? The equity on the balance sheet is worthless on a valuation. The balance sheet does not reflect the value of a company. Only the cash and debt are reflected in enterprise value.

Enterprise value = market cap + total debt - cash

The above represents the value of the company. I don't understand how you are thinking of value.

 

Enterprise Value is Enterprise Value.
More accurate than Market Capitalisation.

The actual sale/purchase price is different.

Right now, NO ONE will pay $100 Billion to buy Tesla. Period.

Right now, to pay $100 Billion to purchase Tesla is to be ripped off by highs in the stock market.
It was only something like 6 months ago was Tesla stock was trading at some $170 per share...

 

I've given you the definition of Enterprise Value. If Apple wanted to buy Tesla today, they would have to pay the $100B plus an acquisition premium to buy them today. The value is determined by the shareholders who own and trade the stock.

From the arguments you provide, you do not understand what the efficient market hypothesis is and how the markets work. If you don't believe in Tesla's value, that is YOUR BELIEF. The market determines what ACTUAL value of Tesla in the marketplace. Enterprise value is simply Market Cap + Debt - Cash. The more you argue this point, the more you reveal you have no understanding of finance.

 

Motor Trend made the SF to LA trip in a Long Range Model S almost a year ago, over the Grapevine, without stopping, and with 41 miles of range remaining at the end. They basically could have gone 400 total miles.

 

With stuff like this powering AutoPilot -- it shows very cutting edge technology at work to improve the car's self awareness in real time. Why would you trust any other system?

Things like this show and prove Tesla's worth. If no one can catch up to this technology, Tesla could perhaps license it as part of an evolutionary global standardization of this tech (and maybe enable vehicles to more self aware to each other as well) It would be one less tech issue the automaker has to worry about and stay in their lane of excelling within the auto biz not tech.

 

https://markets.businessinsider.com/stocks/tsla-stock

Now, on January the 31st, roughly 4.4 million shares were traded at an average of $650 each.
On January the 30th, roughly 7.7 million shares were traded at an average of $640 each.

Presently, Tesla has something like a total of 184 million shares.
Musk owns roughly 20% of that total.

The past few days, some 4 to 7 million shares are traded, and at $650 each or whatever.

The problem is this.
Ezz, you are "assuming" that you can sell ALL 184 million Tesla shares for $650 each = Market Capitalisation, which in turn is not too different from Enterprise Value.
What you must understand is that Tesla shares are sold at $650 each, but only at 4 to 7 million shares in volume.
Ezz, if you actually found a buyer [or a group of buyers] willing to purchase ALL 184 million Tesla shares, you must understand that they generally will NOT pay $650 each at that full volume!

Thus, market caps and enterprise value is compared with equity to indicate whether shares are undervalued/overvalued, and this in turn acts as an indicator whether traders buy or sell shares.
For example, last year when Tesla share price was at a disgusting $179 each - clever share traders would buy more stocks.
Now when Tesla stocks are trading at $650 each, the clever traders who purchased for $179 each would sell at $650 each etc.

Market capitalisation and enterprise values are NOT true indicators of what a corporation would sell for; they are theoretical indicators, but not true indicators.
For example, you can speculate how much a property would sell for all you like - however you won't actually know what it sells for until you actually sell it....
.

 

Go re-read my prior post. I said If Apple were to buy Tesla, it would have to pay its market cap PLUS AN ACQUISITION PREMIUM. A company's value is based on market cap but when another company buys the public company it's assumed that there is a synergy for the buyer so the selling company negotiates a higher value so they too can benefit from the value of the synergy. A company never sells for less than the market cap! You are now reinforcing the fact that Tesla is worth more should it sell to another company

Many M&A professionals (yes including me) do this for a living. Most shares are not owned by regular people. They are owned by giant mutual funds / hedge funds/ founders etc. you negotiate the price through mgmt and board of directors, and if they approve (they represent shareholders) there is a process get all shares sold. Again, you really seem to have no clue on how finance and M&As work.

 

Interesting posts in finance and stock, I will say I'm clueless on most of that ha ha. Overall I think Tesla has shaken up the market in a good way, most including myself expected the existing auto manufacturers Toyota etc...to lead the way on EV.

 

Buying a company requires agreeing to a price with shareholders who together hold a majority of the shares (over 50%), it does not require negotiating a price with ALL shareholders.

 

Gosh, cracking $700 barrier already. The only recent news of late are the battery supply contract and a big bull analyst looking at what it may be valued at by 2024.
Its a herd mentality now and markets has not settled properly because of the coronavirus and brexit. Any stock with a parabolic like move is due for a fall and finding a new 'base' of buyers and sellers.

Anything Tesla does to make their vehicles better with China will have a ripple effect on future gigafactories.

Consider:

Battery life can be extending for a longer life.
Longer charge capabilities (and possible upgrade paths)
Advancements in battery tech could make the car lighter, faster, quicker to recharge.
EV costs compared to ICE car may find equilibrium soon, and future years EV will be lower cost than petrol (in past 4-7 years, EV has meant a 5-15k price premium).

The trickle of good news globally is now the short sellers worst night mare. It has survived cash crunches. It has survived safety investigations. It has survived/learned from unfortunate accidents.

My local dealership has a Chevy Bolt for sale. Price was slashed from $39k to $27k to see if they could move it by 2/3/2020 and failed. Every EV option Chevy has introduced has a petrol twin (same body, different brand). It's a wonky way to be 'in the EV' game but you're really not 'ALL IN'. The EV space is owned by Tesla for the next 2 years. Porsche and HUMMER Super Bowl announcements are NOT vehicles for critical mass. Instead niche markets for people who have more than a $1 million in disposable income a year. No way will it add up to market distorting 100k+ unit sales globally.

Someday this year Tesla will celebrate their 1 millionth vehicle made (over 12 years in business) and stock will pop again. Predictions will emerge when they will hit the 2millionth vehicle. By the time the 4th Gigafactory is done in Germany, we could be reaching that production milestone by 2022-23 timeframe.

Tesla may be just like Apple and account for most of the profit in the EV vehicle sector this decade (similarly to how Apple iPhones bring in majority of the smart phone industry profit). Everyone else will have to lose money for 3-4 years to get a vehicle accepted.

The interesting part is what Tesla has done is they don't have to worry about a specific vehicle getting accepted (like eTron, or Taycan, or HUMMER) because the main 'Tesla' brand is what the market is accepting of and extends a 'halo' effect to all of it's vehicles under it. Just watch very carefully how Mercedes/BMW try to extend EV/hybrid benefits to as many vehicles in their line up. Do it badly, the entire brand can be at risk and subject to negative backlash. Volvo's EV division seems to have an approach that may work. Everything in 2020/2021 must be a calculated move to be successful from their past shortcomings. If it means building and repairing damaged perceptions/relationships with the never-german-cars-again crowd, so be it.