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GM's value is zero. The stock price represents a nervous dance between shorts and longs who try to force sqeezes. (And I suppose there are gamblers who are bett

GM's value is zero. The stock price represents a nervous dance between shorts and longs who try to force sqeezes. (And I suppose there are gamblers who are betting that the government will bail them out without a ch 11 style reorg.)

medearis 17y ago
If GM's value speculative then Telsa's valuation is completely pulled out of thin air. Just a few months ago Tesla was actually losing money on every car they sold. Now they're asking for government money to stay afloat and promising a 50k sedan for the masses. Let me get this straight... at the moment, they cant build a miata sized roadster with a sparse interior on an existing platform for less than 90k, but in 2 years they're going to have a profitable full-sized sedan to go up against cars like the Lexus GS, BMW 5 and Mercedes E selling for half that? I love Tesla, but if I had to place my bets, I'd think it more likely that you'll be able to buy a Corvette in 10 years than a Tesla roadster.
- gojomo 17y ago
  A value "pulled out of thin air" is still better than "almost certainly zero via bankruptcy". And even if Corvettes rather than Teslas are still on sale 10 years from now, that might not mean any value flows to current GM stockholders. The most likely discontinuity ahead for GM is a zeroing-out of all current stockholders. For Tesla, there are certain discontinuities -- such as acquisition for technology -- that pay off stockholders even if the nameplate disappears.
- rrival 17y ago
  It's ok. They'll make it up in volume ;)
yummyfajitas 17y ago
Depends on what you mean by "GM's value". There is the Net Present Value (NPV) of GM, which is the value of it's future revenue streams - future losses. (Future revenue streams include some bailout money, etc.) Currently, the expected NPV of GM is negative. Then there is the share price of GM. This is equal to max(NPV,0) because even if the NPV of GM is negative, you won't lose more than the value of your shares. So a share of GM stock is actually an option on the NPV of the company. This is nonzero, since there is a chance GM will recover. Fun fact: to increase the value of GM's shares, you can either increase NPV or increase volatility. [edit: my use of the term enterprise value was wrong. I think I meant NPV, but I'm not 100% sure of terminology. Thanks sachinag.]
- sachinag 17y ago
  Enterprise Value is not revenue minus losses. EV is equity market capitalization plus debt. But, woooo NYU.
  - YuriNiyazov 17y ago
    NYU?
- danteembermage 17y ago
  Also, fun: If equity is an option on the underlying firm, then who wrote it?, the debt holders. So more accurately "The long tail of GM's upside worth double Tesla Motors" since the value of GM's public debt, even in bankruptcy, would dwarf Tesla.

medearis 17y ago

If GM's value speculative then Telsa's valuation is completely pulled out of thin air. Just a few months ago Tesla was actually losing money on every car they sold. Now they're asking for government money to stay afloat and promising a 50k sedan for the masses. Let me get this straight... at the moment, they cant build a miata sized roadster with a sparse interior on an existing platform for less than 90k, but in 2 years they're going to have a profitable full-sized sedan to go up against cars like the Lexus GS, BMW 5 and Mercedes E selling for half that? I love Tesla, but if I had to place my bets, I'd think it more likely that you'll be able to buy a Corvette in 10 years than a Tesla roadster.

gojomo 17y ago
A value "pulled out of thin air" is still better than "almost certainly zero via bankruptcy". And even if Corvettes rather than Teslas are still on sale 10 years from now, that might not mean any value flows to current GM stockholders. The most likely discontinuity ahead for GM is a zeroing-out of all current stockholders. For Tesla, there are certain discontinuities -- such as acquisition for technology -- that pay off stockholders even if the nameplate disappears.
rrival 17y ago
It's ok. They'll make it up in volume ;)

yummyfajitas 17y ago

Depends on what you mean by "GM's value". There is the Net Present Value (NPV) of GM, which is the value of it's future revenue streams - future losses. (Future revenue streams include some bailout money, etc.) Currently, the expected NPV of GM is negative. Then there is the share price of GM. This is equal to max(NPV,0) because even if the NPV of GM is negative, you won't lose more than the value of your shares. So a share of GM stock is actually an option on the NPV of the company. This is nonzero, since there is a chance GM will recover. Fun fact: to increase the value of GM's shares, you can either increase NPV or increase volatility. [edit: my use of the term enterprise value was wrong. I think I meant NPV, but I'm not 100% sure of terminology. Thanks sachinag.]

sachinag 17y ago
Enterprise Value is not revenue minus losses. EV is equity market capitalization plus debt. But, woooo NYU.
- YuriNiyazov 17y ago
  NYU?
danteembermage 17y ago
Also, fun: If equity is an option on the underlying firm, then who wrote it?, the debt holders. So more accurately "The long tail of GM's upside worth double Tesla Motors" since the value of GM's public debt, even in bankruptcy, would dwarf Tesla.