People I really like this valuation model. It's si
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Posted On: 08/18/2019 5:26:30 AM
People I really like this valuation model. It's simple, anyone can understand.
To be frank, it's like the model I'm using myself. Complex models with a lot of variables do not necessarily (and often don't) lead to a more reliable outcome. Just as more information doesn't necessarily lead to better decisions.
Anyway, we all know why there is such a huge gap between the expected and the current marketcap besides the chicken/egg cause.
There is the point of course that the expected marketcap has to be shared with a larger shareholder base (all warrants will be or are exercised if the expected marketcap has become a reality). Addional funds are needed to get to sales. That funding can be dilutive.
And exactly that possibly needed additional equity funding is the pain point.
People do not only think long term. Long term as in: suppose in the end there will be 1 billion outstanding shares (which sounds ridiculous, but hey, just to be on the safe side). That would mean with an expected marketcap of 1.2 billion the share price would be $ 1.20. People don't think "I can't go wrong here, my model says the share price will be (at least) $ 1.20 (short-medium term) and I'm paying something like 40 cents.
People also think short term. And short term thinking is what people like to do (I want it now!). The reality has been that any dilution caused the share price to decrease. Some people (rightly or not) are even talking of the share price going to 30 cents (even 20 cents). That possibility of getting hurt by a lower share price short term makes people not wanting to pay more now than 40 cents or so. (That's only one explanation, because there are also people using short term expectations to make the most money long term
).
Having written this maybe it's time to worry less about short term price fluctuations. My long term holding currently has a share price of 43 cents and yes worst case the price can get to 20 cents (I do not even remotely think that is possible) but longer term the future worst case share price will be $ 1.20.
That's already a great result!
(I know, nobody is in it for the $ 1.20 and we're all expecting/hoping for a far better share price. I am anyway)
To be frank, it's like the model I'm using myself. Complex models with a lot of variables do not necessarily (and often don't) lead to a more reliable outcome. Just as more information doesn't necessarily lead to better decisions.
Anyway, we all know why there is such a huge gap between the expected and the current marketcap besides the chicken/egg cause.
There is the point of course that the expected marketcap has to be shared with a larger shareholder base (all warrants will be or are exercised if the expected marketcap has become a reality). Addional funds are needed to get to sales. That funding can be dilutive.
And exactly that possibly needed additional equity funding is the pain point.
People do not only think long term. Long term as in: suppose in the end there will be 1 billion outstanding shares (which sounds ridiculous, but hey, just to be on the safe side). That would mean with an expected marketcap of 1.2 billion the share price would be $ 1.20. People don't think "I can't go wrong here, my model says the share price will be (at least) $ 1.20 (short-medium term) and I'm paying something like 40 cents.
People also think short term. And short term thinking is what people like to do (I want it now!). The reality has been that any dilution caused the share price to decrease. Some people (rightly or not) are even talking of the share price going to 30 cents (even 20 cents). That possibility of getting hurt by a lower share price short term makes people not wanting to pay more now than 40 cents or so. (That's only one explanation, because there are also people using short term expectations to make the most money long term
). Having written this maybe it's time to worry less about short term price fluctuations. My long term holding currently has a share price of 43 cents and yes worst case the price can get to 20 cents (I do not even remotely think that is possible) but longer term the future worst case share price will be $ 1.20.
That's already a great result!
(I know, nobody is in it for the $ 1.20 and we're all expecting/hoping for a far better share price. I am anyway)
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