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It’s not like 600B evaluation is equal to being able to sell for 600B. Let me explain. If you got a company named T with a total of 100 shares. Now they want t

by tanto 6y ago

It’s not like 600B evaluation is equal to being able to sell for 600B. Let me explain. If you got a company named T with a total of 100 shares. Now they want to raise money and someone is willing to pay $10 for a share. You get a market cap of $1000. They create the extra share and someone is still willing to pay $10 a share. Magically they are worth $1010. Now T is selling the share for $10 and the next guy willing to buy only wants to pay $9. Magically the market cap drops to $909. Right now many Tesla share owners believe they will get rich by holding. Someday all of them might realize at the same time everybody is holding and decide to sell. If that day is tomorrow it will not be 600B actual dollars changing ownership. If Tesla would raise 25% market cap they would destroy the stock. I guess it might take at least a month or more for the market to absorb 1% new shares. Right now we have a market where a lot of people sold and the same or new investors freshly bought again and are optimistic. We got many people buying and not so much selling. Market cap is in a way a to simplistic metric.

justapassenger 6y ago
It works like that for companies with normal, fundamentals based valuation. Tesla stock is hype driven meme stock for last few years, and it’s very plausible that even a huge raise would result in stock price going up. It’s a huge party like it’s 1920s again.
- tanto 6y ago
  I don't think you are correct. You imply there are a lot of people willing to buy for the current price. I think the scenario is different. A professional trader is happy if he makes 10% or 20% a year. This is considered for most a great achievement. The average Joe whose friend told him that he can get rich buying Tesla stocks will only sell for 200%, 300% or even 1000%+ on his micro shares. We got a market full of people which go in and buy for whatever is there and try to sell for a lot more. Sometimes they panic and sometimes they forget about it. Additionally we currently have a lot of index funds forced to buy because of the inclusion. Which is genius move of Musk/Mizuno and others. It's hard to predict where Tesla, Zoom and others will end up. I wouldn't dare to make any prediction. They might grow into their evaluations given time or a lot of average Joe's might decide its time to pay rent or even buy a house. Let's wait and see.

by tanto 6y ago

justapassenger 6y ago

It works like that for companies with normal, fundamentals based valuation. Tesla stock is hype driven meme stock for last few years, and it’s very plausible that even a huge raise would result in stock price going up. It’s a huge party like it’s 1920s again.

tanto 6y ago
I don't think you are correct. You imply there are a lot of people willing to buy for the current price. I think the scenario is different. A professional trader is happy if he makes 10% or 20% a year. This is considered for most a great achievement. The average Joe whose friend told him that he can get rich buying Tesla stocks will only sell for 200%, 300% or even 1000%+ on his micro shares. We got a market full of people which go in and buy for whatever is there and try to sell for a lot more. Sometimes they panic and sometimes they forget about it. Additionally we currently have a lot of index funds forced to buy because of the inclusion. Which is genius move of Musk/Mizuno and others. It's hard to predict where Tesla, Zoom and others will end up. I wouldn't dare to make any prediction. They might grow into their evaluations given time or a lot of average Joe's might decide its time to pay rent or even buy a house. Let's wait and see.