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hansthered0 (< 20)

GM...Market cap 2.96 Billion needs 4 Billion to survive???

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December 02, 2008 – Comments (3) | RELATED TICKERS: GM , F

http://www.reuters.com/article/businessNews/idUSTRE4B189D20081203

Now I'm no math genius...but WTF is going on here? They need more money to survive the next quarter than their company is worth?

I think the value of this company should be exactly $0. Let them fail. We need to suffer through this to get it all over with.

3 Comments – Post Your Own

#1) On December 02, 2008 at 10:59 PM, Option1307 (30.30) wrote:

I agree, but chances of that coming to pass this week are slim to none. There is no way our spineless Congress is going to look these companies in the eye and say "no dice". That would cost them too many votes, and potential their seat in Congress. Thus, its not going to happen.

We can wish and hope, but I'm not holding my breath.

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#2) On December 02, 2008 at 11:33 PM, dexion10 (27.18) wrote:

Interesting Post - but GM's valuation is actually $32B.

 

A common mistake that Fools make is to think a company is only worth the amount of it's market cap.

Company's total price tag is not represented by the market cap.  Market cap is simply a valuation of all the stock.

But in the real world when you buy a company you not only get the stock... you get all the assets and all the liabilities... those liabilities are part of the cost of the business.

 

Private Equity Investors and Bond investors often look at Enterprise Value (EV) instead of market cap for this reason.

 

Simply put EV is:

Market Cap + Debt - Cash

That is the real cost of buying a business.

1. Buying the stock (market cap)

2. Assuming the Debts (Debt)

3. Less the cash (if you get cash back at closing that lowers the cost by an amount equal to the cash).

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#3) On December 03, 2008 at 10:29 AM, hansthered0 (< 20) wrote:

Good to know

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