Tesla market cap is US$ 1.3 Trillion in comparison to regular car manufacturer it’s ridiculously high
The world leader Toyota has like market cap of 45 billions and other big manufacturer reach similar value. The only exception being the other leading brand on electric car “BYD” with a market cap of 750 billions.
However, even assuming that Tesla stays the leader of electric car, how would it make it more valuable that let’s say Toyota. Especially now that “many of the person who can invest the price of an appartment in a fancy car” did switch to electric, and that the electric market needs to develop the cheap and compact urban car for middle-class person who can’t afford a car above 20 thousands euros (Because to be realistic the era of 10 000 EUR car is over)
I simply can’t understand how Tesla market valuation is so high
Established car makers have businesses that are easier to predict. They’ve been operating for a long time and you have a pretty good idea what “doing well” or “doing poorly” would look like for them. A much newer company like Tesla, which is based on emerging technology, does not have so well-understood of a future. There’s a lot more unknown about how big it might become.
Most times, this is seen as big unknowns and risk, therefore investors are wary. But Tesla has had enough real world success to be encouraging, yet is still new enough to enjoy “we don’t know how big this thing will get” speculation. Basically a lot of people think it’s a reasonable bet that Tesla will be huge in the future. Therefore their stock has high demand.
Here’s a related question… Why is Elon Musk demanding a massive cash salary from the board rather than typical CEO compensation of stock and performance bonuses?
Likely, he understands that the company is massively overvalued due to his hype machine. He is cashing out before it fails.
As a plus, by manufacturing animosity between himself and the board, he is preloading the ammunition for when the company fails and discards him. When he leaves, the hype machine leaves with him. The stock will “crash” which really means returning to a sane market valuation. He can easily claim that the failure was due to the board interfering with his genius. The board members either know this, or are his lackies (or both). They will ride the wave along with him as long as they can.
In essence, we are witnessing the largest pump and dump scheme in history, and it is being done in the open.
This is absolutely spot on.
Investors are every bit as vulnerable to hype, marketing, and just plain poor understanding of tech as the general public is.
It’s a bubble.
Same reason as bitcoin
Stock manipulation
Meme stock investors and hype
You assume market cap is a metric that would be used to determine if a company is doing well.
When really market cap is just the share price times the number of shares.
What gives the shares value? The expectation that someone else will purchase it at a price it is being offered at.
The expectation that someone else will purchase it at a price it is being offered at.
Which is a hilarious extrapolation since all shares being offered at the same time (total market cap) would cause the ‘value’ to dive bomb.
Unless someone purchases the company. Then it is common to buy out all the shares at (around) the current market price. The market cap is a good measure of how expensive a public company is to buy outright.
They don’t buy out all the shares, just a controlling interest or whatever they call it.
It depends but sometimes they do. Like if a vc takes a public company private it generally takes all shares or if another public company takes over they will exchange the shares for their own. A recent example Broadcom purchased VMware
VMware shareholders will elect to receive either $142.50 in cash or 0.2520 shares of Broadcom common stock for each VMware share.
If they want to control the company, without outright buying it, yes. It’s the classic way to acomplish a hostile takeover. Thing is, buying half the shares on the market is often more expensive than the current market cap, as mass buying shares sends the price up quickly.
When buying a company outright (ie, your company actually owns the purchased company and both sides agreed to the transfer), then it is common to buy out all the shares at (around) current market value.
Ya gotta do it slow, like Porsche did to VW in 2005
https://www.motortrend.com/news/porsche-and-volkswagen-what-happened/
That is one option that is sometimes used. More commonly if you want the company you just buy 10-20% which you can get fairly quickly without affecting the price too much, then you use your large stock holder privileges to go to the board and ask them to sell for current price + small margin. The board will almost always put this to a shareholder vote and is it likely enough will go for it (you already control 20% of those votes so you need just 31% to defect). Most large companies have rules around this so you might need more than 50% of the vote, but still odds are you can get enough votes.
What Porsche did to VW is different. The German government owns 25% of VW and are not selling and have laws in place to ensure that VW cannot be bought. That forces Porsche to instead buy the remaining shares but they can never just buy the company. It is an interesting case, but it is an exception to the normal rules and so be careful not to apply it elsewhere.
Maybe that’s why teslas market cap is so high: people are expecting VW group to buy them.
VW has ~$80 billion cash on hand, they could buy 6% of the shares
The price of very large publically traded companies is set entirely by supply and demand. Yes, those shares do represent a tiny share of ownership in the company, which means a share in the profits and assets of the company. But there is no law tying them together. Tesla’s market value is so high because there are more buyers than sellers, it’s as simple as that.
There is are laws that ties them together. When then company goes bankrupt all shares stop trading (not when they declare bankruptcy, it will be later in the process) thus forcing the value to zero. When someone else buys the company all shares are force sold aa an agreed upon price (you get to vote on the price but if you vote no and lose you still sell) thus forcing the final trading price. There are also ways for a company to be delisted based on something the company does - the stock can still be traded but it becomes much harder without an exchange and so the effective value is zero (or maybe a few cents if you can figure out how to trade anyway).
However the above are all things that don’t happen very often to any one company. Nearly every week has several companies do one of the above, but if you are looking at a specific company it will probably be decades before the above happens and those are decades where the price is whatever supply and demand wants it to be. Because of the above threats long term the value of a company tends to correlate to the company size / value, but that long term can be decades.
Just to clarify, supply and demand refers here to supply and demand for the stock, not for the product (cars).
Generally, the two will be related. Sometimes, however, investors see a stock going up and they consider it valuable because they see it performing well, creating a self-fulfilling prophecy. This is how bubbles are made.
The Tesla stock is keeping afloat exclusively due to the perceived worth of the Tesla stock. It could keep increasing if the perceived value keeps increasing. At some point it will almost certainly fail spectacularly, but if this happens tomorrow or in ten years is anybody’s guess.
Usamerican investors love to hear the bigmouth stuff from Massa Elon. In addition, they expect some support by the next bigmouth president.
Can’t hear what they’re saying with a mouthful of shit.
Just a guess, I think it’s just general stock market shit. Electric cars is a growing market while combustion engine cars is a shrinking market. So the expectation is that electric car manufacturers will increase in value while others will shrink. That makes investors invest and actually make the value go up.
Even if all cars sold were Teslas their value is more than all the combustion car manufactures. Most combustion car manufactures also have electric cars and will make more if/as the market demands. (some of them are not making good electric cars, but they are likely to improve)
