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PAULQ: BUT the question is, "is it a 20" or 10" and how much for a slice of each against the cost of the whole pizza"? Also how many people are interested in a slice and how much they would be willing to pay?
Really guys chill, please!
Yes we're all peeved that we're not where we thought we would be by now in terms of SP, but don't turn on each other like we did last October.
Many posters have been quite impressed with US lately so be nice, yeah?
I would like to end this thread with " I'm deep pan, your thin crust".
Haddock and Chips with a dash of Pops.
What a waste of time this thread was...but funny to read
Good Luck all.
All this pizza talk is making me hungry :-))
I think everybody here understands what your are trying to say, it's just that most are trying to convey the fact that it is the mkt cap that drives the share price, not the share price that drives the mkt cap.
Ok fair enough maybe Im looking at it too deep.. but thanks :)
jemchipsa... as I think has been established it is not to much that what you say is "wrong" it is simply that you have an odd way of expressing a sentiment everybody accepts as obvious...
A mkt cap isn't so much strong or weak it, is "high" or "low". Even a low mkt cap can "cope" just fine with a high number of shares, it simply does so by resulting in a low share price.
I think everybody here understands what your are trying to say, it's just that most are trying to convey the fact that it is the mkt cap that drives the share price, not the share price that drives the mkt cap.
HH
that a market cap could be not strong enough to cope with the amount of shares you have.
My point was that if you add more shares and your MCAP doesn't change then it wont cope with these and give us a lower share price which is currently what we have. The market thinks the MCAP is right with the current amount of shares or else people would value it more and it would move up.
I was replying to the comment
JAdam - how is the number of shares in issue used in calculating the market cap of a company?
and correcting the pizza view that he gave
I'm not disagreeing with that, that is the formula, correct but what Starbright was explaining was what I said in my last message.; the share price is a derivative or a function of the market cap, not vice versa.
The only reason I joined in (which I regret) is because, the fundamental thing I disagreed with was the statement that a market cap could be not strong enough to cope with the amount of shares you have.
It is technically pointless to be discussing this though as it's trivial and a slightly pedantic point.
I've not read all the way back through this somewhat comedic rant where it seems everyone is seemingly arguing the same point about something so fundamental we all should know it any way... but here s another statement of the obvious...
Share price isn't an absolute "thing" in its own right it is a product of a companies total value (ie mkt cap) divided by the number of parts that value is divided into (the number of shares in existence)
If a company grows in value it either results in the share price increasing, or the company being able to issue more shares without devaluing those already in existence. With big blue-chip companies we almost invariably expect the former response, with small junior miners lacking any means of generating revenue the latter is the case, and all to often driven in reverse... that is to say the company sells new shares to raise capital hoping to increase the value of the company enough to avoid the value of existing shares dropping.
HH
Saying that the size of the pizza doesnt matter is not CORRECT, the size of your MCAP represents how big your pizza is.
The size of the pizza is the market cap though - correct
UFO is 39m currently.
The amount of slices = the amount of shares
3423m shares
SHARE PRICE = MCAP divided by the amount of SHARES
if your shares stay the same and the price goes up so does the MCAP
if you increase shares the value of your shares decrease.
Technically none of this matters, but it is just understanding that share price is a function or derivative of the market cap, not vice versa.
The value of a company is not the MCAP. Hence why you get people who think it should be diffferent. Do we think 39m which is the current MCAP of UFO is the correct value but that is the MARKET VALUE. If you dilute a share the amount of shares will lower the price and the market adjusts the price to reflect what it should be with the current MCAP. It is up to investor to the decide by buying the share at that price if that current MCAP has changed. If people buy more of the share at the new price the MCAP will increase. The value of your portion is being valued more.
When you talk about valuation of a company that is always theoretical, each broker will have there own way of coming up with these figures by adding income, debts, assets and potential. This is nothing to do with MCAP. MCAP gives you what the market thinks its worth.
The size of the pizza is the market cap though, so a 20 inch pizza has an area of 314.2 square inches, where as a pizza with a 10 inch diameter has an area of 78.5 square inches.
So the 20 inch pizza has a market cap 4x the size of the 10 inch pizza, therefore if they both were divided into 4 slices, I would be willing to pay 4x more for one slice of the 20 inch pizza.
Jem and JAdam, SB isn't disagreeing with the fact that: number of shares in issue x share price = market cap.
But the facts are that the valuation of a company is not impacted in the slightest by the number of shares in issue (all other factors held equal).
A share has no value without it being derived from somewhere, that somewhere is from the market cap.
Statements like "if your MCAP isn't strong enough to cope with the amount of shares you get an incorrect share price" - that simply isn't true, a share price cannot be incorrect. A company can be undervalued, but as the share price is derived from a value assigned by the market (the market cap), and a number of shares in issue it can not be an incorrect number.
My Last Try -
Would you pay the same price for a slice of pizza if a 10" pizza cut into 4 pieces or 20" pizza cut into 4 pieces ? You are saying you value each slice the same ? SO would you pay the same ?
Hang on it doesn't matter how big the pizza is it can be 6 foot diameter if you cut it into 4 you still only get a quarter so the portion is the same it like dividing up a pound coin ,you want it in 5 equal piece you can have 5 20ps, . 5 stacks of 2 10ps
5 stacks of 20 1ps the total is the same or 5 stacks of 4 5ps its still the same so sorry I think SB is right.
Please tell me your not saying this "so the portion is the same" - no its not your getting a bigger or smaller value of slice. Thats what the SHARE PRICE is
Hang on it doesn't matter how big the pizza is it can be 6 foot diameter if you cut it into 4 you still only get a quarter so the portion is the same it like dividing up a pound coin ,you want it in 5 equal piece you can have 5 20ps, . 5 stacks of 2 10ps
5 stacks of 20 1ps the total is the same or 5 stacks of 4 5ps its still the same so sorry I think SB is right.
944t
In order to understand the term MCap, let's assume the Company ABC Corp. has 10,000,000 shares outstanding and the current share price is $9. Based on this information and the formula above, we can calculate that Company ABC Corp.'s market capitalization is 10,000,000 x $9 = $90 million.
Definition - What does Market Capitalization (MCap) mean?
Market capitalization refers to when the total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to sales or total asset figures.
The term frequently referred to as market cap or MCap.
There is a reason dilution is hated by investors because it initally lowers the share price and unless the company can improve its valuation for the money gained from the dilution your in a rocky position.
Thank you EWT98. This was getting beyond parody....
If the company issued more shares would it’s market cap go up?
No but the SHARE PRICE goes DOWN
Q for JAdam (who really should know better...) and jemchipsa...
If the company issued more shares would it’s market cap go up?