Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Why Tesla Is Worth More Than GM

technologyreview.com

Post reply on HN
Print view View original

31–40 of 55 posts

Re: Why Tesla Is Worth More Than GM

#31

Post by elmar »

adventured wrote: post #14
tuna-piano wrote: post #9

It is just not true that Tesla is worth more than GM in the common understanding of that. The real answer to "Why Tesla is Worth More Than GM" is one sentence: GM has more debt than Tesla. People understand (and the article gives reasons why) "worth more than" to be that the GM brands + factories + assets + future prospects are worth less than Tesla brands + Tesla factories + Tesla assets + Tesla future prospects. Bu…

Your premise is entirely wrong. GM has positive $37 billion in net tangible assets. That has climbed from $27b, to $33.9b, to $37b over the last three fiscal years. Their net balance sheet is not only improving, it's dramatically in the positive. To go with that, they have $24 billion in cash and are currently capable of earning around $12 billion in net income on an annualized basis (meaning they can easily afford t…

> Tesla is worth more than GM for one reason: the potential to one day be more profitable than GM, namely that enough shareholders are buying into that premise.

Elon musk created a narrative that is building a completely different way of manufacturing and commercializing cars that differs greatly from historical car manufactures.

If you accept that, current economic models that are used to value other car manufactures can't be used to value Tesla.

Re: Why Tesla Is Worth More Than GM

#32

Post by kgwgk »

stale2002 wrote: post #30
tuna-piano wrote: post #16

Earlier quoted context omitted.

You may know much more about this than me. Is Enterprise Value too simple a calculation to compare the companies? (you seem to be looking at the entire balance sheet, not just cash/debt) Certainly GM could issue stock tomorrow to increase their market cap to be more than Tesla's? Market cap just seems a bit arbitrary of a metric (as it doesn't take into account cap structure) when you're comparing the value of the di…

Issuing stock does precisely nothing to the valuation. IE, imagine if they double the amount of stock. Each stock is now half of the equity that is was before, so price would be cut in half.

Issuing (and selling) shares DOES change the valuation. The price is not cut in half because the company is worth now more than before (it has lots of cash).

Re: Why Tesla Is Worth More Than GM

#33

Post by heisenbit »

It remains to be seen whether Tesla will be able to sustain the success in cars. I'm more optimistic in the rocket business as the competition is limited. The automobile business is complex and scaling out their operation is going to be hard. Tesla's competitors have scale, suppliers who also invest and broad customer brand acceptance. They also have woken up.

China will soon provide battery capacity for cars in excess of what Tesla is producing. Autonomous driving on a broad basis requires a regulatory framework and that may well take time to emerge until there are other brands. The horizontal structure of the conventional car industry makes it likely that alternatives to Teslas autonomous drive will quickly spread across the traditional car companies.

Tesla may well build the best electric car for a long while but volume upside may be limited.

Re: Why Tesla Is Worth More Than GM

#34

Post by heifer2822 »

spectrum1234 wrote: post #26
tuna-piano wrote: post #9

It is just not true that Tesla is worth more than GM in the common understanding of that. The real answer to "Why Tesla is Worth More Than GM" is one sentence: GM has more debt than Tesla. People understand (and the article gives reasons why) "worth more than" to be that the GM brands + factories + assets + future prospects are worth less than Tesla brands + Tesla factories + Tesla assets + Tesla future prospects. Bu…

Except that the MARKET values GM's stock at...exactly what it is priced.

I'm not an expert on this but I think the point was market cap is the value of all outstanding shares. Tesla raised money through venture capital while GM raised money by going to the bank and getting a loan.

Think about buying a $1M rental property. One guy gets 9 friends together and they each put up $100k for 10% of the house. The house/business is worth $1m. The market cap is $1m.

Another guy wants to buy a $1m rental property but he goes to the bank and gets a $900k mortgage. The house is worth $1m but the market cap is only $100k.

Since tesla and GM raised money very differently their market caps are not comparable.

Re: Why Tesla Is Worth More Than GM

#35

Post by [deleted] »

tuna-piano wrote: post #9

It is just not true that Tesla is worth more than GM in the common understanding of that. The real answer to "Why Tesla is Worth More Than GM" is one sentence: GM has more debt than Tesla. People understand (and the article gives reasons why) "worth more than" to be that the GM brands + factories + assets + future prospects are worth less than Tesla brands + Tesla factories + Tesla assets + Tesla future prospects. Bu…

[deleted]

Re: Why Tesla Is Worth More Than GM

#36

Post by kolinko »

adventured wrote: post #14
tuna-piano wrote: post #9

It is just not true that Tesla is worth more than GM in the common understanding of that. The real answer to "Why Tesla is Worth More Than GM" is one sentence: GM has more debt than Tesla. People understand (and the article gives reasons why) "worth more than" to be that the GM brands + factories + assets + future prospects are worth less than Tesla brands + Tesla factories + Tesla assets + Tesla future prospects. Bu…

Your premise is entirely wrong. GM has positive $37 billion in net tangible assets. That has climbed from $27b, to $33.9b, to $37b over the last three fiscal years. Their net balance sheet is not only improving, it's dramatically in the positive. To go with that, they have $24 billion in cash and are currently capable of earning around $12 billion in net income on an annualized basis (meaning they can easily afford t…

Thanks for this outline.

What is a go-to place for finding data for such analysis? I would like to learn this :)

Re: Why Tesla Is Worth More Than GM

#37

Post by nbouscal »

> The digital economy is giving us a world in which the benefits are concentrated among consumers and the Big Five who serve them. Everyone else just lives in it.

This is a really weird phrase. "Concentrated among consumers"? More than 80% of Americans use the internet, not exactly "concentrated".

Re: Why Tesla Is Worth More Than GM

#38

Post by nbouscal »

tuna-piano wrote: post #23
adventured wrote: post #22

Earlier quoted context omitted.

> But certainly if the GM entity had $10B more cash tomorrow, it might not be worth $10B more, but certainly it would be worth $5-$10B more (or at the very least >0 more)? No, again, that's not how it works. Shareholders value companies primarily based on a multiple of earnings with an overwhelming tilt toward future expectations, not based on cash. Cash can receive anywhere from a medium to a near-total discount, de…

Certainly if there were two identical companies, and one had $10B more in cash, the one with $10B more in cash would be worth more than the other company? I understand it's not 1-1. I'm thinking completely theoretically, so if the world doesn't work like finance theory, fine. But I just can't see any way in which leverage, debt, cash, etc don't substantially alter the market cap of a company.

adventured is having a really hard time with your phrase "two identical companies". The answer to your question is yes, if you had two identical companies and then gave one of them $10B in cash, that company would be worth $10B more.

Re: Why Tesla Is Worth More Than GM

#39

Post by Garfgon »

elmar wrote: post #31
adventured wrote: post #14

Earlier quoted context omitted.

Your premise is entirely wrong. GM has positive $37 billion in net tangible assets. That has climbed from $27b, to $33.9b, to $37b over the last three fiscal years. Their net balance sheet is not only improving, it's dramatically in the positive. To go with that, they have $24 billion in cash and are currently capable of earning around $12 billion in net income on an annualized basis (meaning they can easily afford t…

> Tesla is worth more than GM for one reason: the potential to one day be more profitable than GM, namely that enough shareholders are buying into that premise. Elon musk created a narrative that is building a completely different way of manufacturing and commercializing cars that differs greatly from historical car manufactures. If you accept that, current economic models that are used to value other car manufacture…

That's the same thing they said about web companies in the mid 90s.

Re: Why Tesla Is Worth More Than GM

#40

Post by porterrobertson »

kolinko wrote: post #36
adventured wrote: post #14

Earlier quoted context omitted.

Your premise is entirely wrong. GM has positive $37 billion in net tangible assets. That has climbed from $27b, to $33.9b, to $37b over the last three fiscal years. Their net balance sheet is not only improving, it's dramatically in the positive. To go with that, they have $24 billion in cash and are currently capable of earning around $12 billion in net income on an annualized basis (meaning they can easily afford t…

Thanks for this outline. What is a go-to place for finding data for such analysis? I would like to learn this :)

Google Finance is actually a pretty excellent resource.
Post reply on HN