Stockbee: This 15 Minute Exercise Will Help You Become A Better

  • The cost of acting: If you decide to act on a bubble, there is a cost. There is an elephant in the room in the form of a gigantic grant of 20.26 million shares to Elon Musk, with the issuance contingent on meeting operating milestones (revenues and adjusted EBITDA) and market milestones (market capitalization). That risk is not in the discounted cash flow valuation and has to be brought in explicitly in the form of a chance of failure. The compensation can take the form of restricted trendy boutique or options, and the annual filing provides the cumulative effect of this share based activity. We value the options, using a modified version of the Black-Scholes model, to arrive at a value of $2,927 million. Adding that to the current share count of 169.76 million shares yields total shares outstanding of 236.85 million shares. The shares issued in the past are simple to deal with, since adding them to the share count will reduce the value per share today. But before selecting the Profitable Tips, you should see different factors including your commission and other charges, their services, and quality, consistency, number of satisfied customers, etc., because these services are offered online, they are on a 24x7 basis.


    A Viable Alternative: There is an alternative approach, where you forecast the number of shares that will be issued in future years to cover the negative cashflows, and count them as shares outstanding today. You cannot do both, because you are then reducing value per share twice for the same phenomenon, once by discounting the negative cash flows and including them in value and then again by increasing the share count for the shares issued to cover those negative cash flows. Many are confused between liquidity and float. At first sight, it may seem like double counting to lower future earnings because you expect option and share grants in the future, and then again lower the value of equity that you obtain by the value of options that are already outstanding. Note that the shares that will be created if the options get exercised should not be included in share count, in this approach, since that would be double counting.



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