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Tesla Car
Christian Kaspar-Bartke / Getty Images
Tesla
stocks broke the $ 700 billion barrier on Monday. It was another impressive ploy for the company Elon Musk, but as investors count, Tesla could already be an $ 800 billion business. In fact, with different accounting Tesla would already be more valuable than even
Facebook
– crosshairs are Tesla’s next company.
Tesla stock (ticker: TSLA) hit $ 744.49 on Monday, giving the company a market capitalization of more than $ 700 billion for the first time, according to Dow Jones Market Data. A closing price of $ 738.48 or higher would mean ending the day with more than $ 700 billion worth, about 10% off Facebook (FB) surpassing 765 billion.
Tesla’s market capitalization, according to Dow Jones Market Data, took 111 days to go from $ 100 billion to $ 200 billion, 13 days to go from $ 200 billion to $ 300 billion, 27 days to go from $ 300 billion to $ 400 billion, and 63 days to go from $ 400 billion to $ 500 billion. It jumped from $ 500 billion to $ 600 billion in eight days, and took an additional 18 to go from $ 600 to $ 700 billion.
Dow Jones data is based on the base allowance account of about 950 million shares. But Tesla reported about 1.1 billion unpaid full-fledged shares in its third-quarter report. The difference of 150 million between underlying and narrowing shares is due to things such as management stock options, restricted stock units, and stock warrants.
With 1.1 billion shares outstanding, Tesla hit about $ 820 billion in market value on Monday.
Facebook’s underlying and narrowed share account, based on third-quarter filing, is 2.85 billion and 2.89 billion shares, respectively. On a fully narrowed basis, Facebook is worth around $ 780 billion, falling short of Tesla ‘s $ 820 billion figure.
The difference between underlying and diluted shares for Tesla is greater than that of most companies because CEO Musk receives most of his compensation through stock rewards linked to the company’s performance.
General motors
(GM), on the other hand, reported 1.432 billion outstanding shares in their third quarter report and 1.439 billion fully diluted shares outstanding, for a gap of 7 million.
Investors may be okay with paying Musk in stock. It has created a lot of value. Shares rose about 740% in 2020, crushing the yields of the
S&P 500
and most other car stocks. However, it is a good idea for investors to experience the valuation difference.
Stock options are not easy to account for. One way to describe options in corporate valuations is the treasure stock method. That approach assumes that the company receives money from the management stock options and then uses that money received to repurchase shares. Since the stock options are priced lower than the normal quota price, a company cannot buy back all the stock that has been handed over to the management. The allowance count creeps up as stock options are used.
That’s the decent thing to do, and it should end there. But investors should also remember that if they were to value Tesla with fully diluted shares payable, they should return the compensation based on shares recognized in Tesla’s income statement. Companies are required to recognize a cost for share-based compensation in their income statements. For example, Tesla recognized $ 1.1 billion in stock-based compensation over the first nine months of 2020.
In general, stock compensation costs go higher as gains in the price of a company’s shares accelerate. Higher stock prices make the options more value.
Tesla is a specialty company. It just makes electric vehicles and is the most valuable automotive company on the planet. The positioning of the options is just another unusual factor to consider when comparing Tesla to its peers.
Tesla stock rose about 2.9% in midday trading at $ 726.43. The news is that strong fourth-quarter delivery, reported over the weekend, has lifted the stock. The
Dow Jones business average,
on the other hand, it is down about 1.7% in midday trading.
Write to Al Root at [email protected]