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Comparing their asset balance with the market cap of its stock is complete nonsense. Tesla has 100% access to the BTCs and other asset it holds but there is no

by noxer 6y ago

Comparing their asset balance with the market cap of its stock is complete nonsense. Tesla has 100% access to the BTCs and other asset it holds but there is no access to the market cap. Its a fictive price tag on all existing shares. People use it to compare companies. The money does not exist anywhere and certainly can not be used by Tesla.

mullingitover 6y ago
> The money does not exist anywhere and certainly can not be used by Tesla. What exactly is stopping them from borrowing against their shares?
- noxer 6y ago
  The market cap is calculated from all shares. Tesla obvious does not owe them.
JumpCrisscross 6y ago
> Comparing their asset balance with the market cap of its stock is complete nonsense Eh, not really. They’re both stock (as opposed to flow) measures. And one is a subset of the other. That said, crypto as fraction of assets would be a more rigorous metric.
- noxer 6y ago
  >And one is a subset of the other. Not alt all. Mark cap is a fictive value. Assets hold by a company aren't fictive and are not part of the market cap at all. Market cap is simply the price of all stocks at the current market price of one. >crypto as fraction of assets That would make more sense but also would need to include debts.
  - sokoloff 6y ago
    If Tesla announced it was going to sell all of its BTC tomorrow, would they get 100% of its notional value? There’s a reason companies list “cash and equivalents” and BTC isn’t included in that line on the balance sheet.
    - noxer 6y ago
      >would they get 100% of its notional value? depend on the liquidity on that day also they could OTC sell so yes they can probably get the market price. However telling the market fist isnt going to help. >There’s a reason companies list “cash and equivalents” and BTC isn’t included in that line on the balance sheet. Yes, the reason is volatility and uncertain liquidity. To compare BTC with cash equivalents you could use volume adjusted price over the last months, that would give a good short term cash value. But long term ofc its impossible to know what it may be worth. Not quite sure how that's relevant to what I said, namely that assets hold by a company are not comparable to the companies market cap.
mrfredward 6y ago
>Comparing their asset balance with the market cap of its stock is complete nonsense. Ben Graham, one of Warren buffet's mentors, wrote a famous book called the "Intelligent Investor" which has several chapters on doing exactly that. Think about it...if a company sells $10 billion in stock, the new stock adds $10 billion to their market cap and they get an extra $10 billion in cash which goes on their balance sheet. And likewise, a company can buy back shares and the reduction in marketcap from destroying shares is equal to the amount of cash assets being removed from the balance sheet. There's a link here.

by noxer 6y ago

mullingitover 6y ago

> The money does not exist anywhere and certainly can not be used by Tesla. What exactly is stopping them from borrowing against their shares?

noxer 6y ago
The market cap is calculated from all shares. Tesla obvious does not owe them.

JumpCrisscross 6y ago

> Comparing their asset balance with the market cap of its stock is complete nonsense Eh, not really. They’re both stock (as opposed to flow) measures. And one is a subset of the other. That said, crypto as fraction of assets would be a more rigorous metric.

noxer 6y ago
>And one is a subset of the other. Not alt all. Mark cap is a fictive value. Assets hold by a company aren't fictive and are not part of the market cap at all. Market cap is simply the price of all stocks at the current market price of one. >crypto as fraction of assets That would make more sense but also would need to include debts.
- sokoloff 6y ago
  If Tesla announced it was going to sell all of its BTC tomorrow, would they get 100% of its notional value? There’s a reason companies list “cash and equivalents” and BTC isn’t included in that line on the balance sheet.
  - noxer 6y ago
    >would they get 100% of its notional value? depend on the liquidity on that day also they could OTC sell so yes they can probably get the market price. However telling the market fist isnt going to help. >There’s a reason companies list “cash and equivalents” and BTC isn’t included in that line on the balance sheet. Yes, the reason is volatility and uncertain liquidity. To compare BTC with cash equivalents you could use volume adjusted price over the last months, that would give a good short term cash value. But long term ofc its impossible to know what it may be worth. Not quite sure how that's relevant to what I said, namely that assets hold by a company are not comparable to the companies market cap.

mrfredward 6y ago

>Comparing their asset balance with the market cap of its stock is complete nonsense. Ben Graham, one of Warren buffet's mentors, wrote a famous book called the "Intelligent Investor" which has several chapters on doing exactly that. Think about it...if a company sells $10 billion in stock, the new stock adds $10 billion to their market cap and they get an extra $10 billion in cash which goes on their balance sheet. And likewise, a company can buy back shares and the reduction in marketcap from destroying shares is equal to the amount of cash assets being removed from the balance sheet. There's a link here.