Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 11
"then this stock is really going to run because it won't be so beind XM which is 37/share."

Statements like this never cease to amaze me. Since there appears to be a lot of new investors on this board let me try to explain the fallacy of this statement.

SIRI has a LOT more shares out than XMSR. That is why a share of SIRI is less than a share of XMSR.

Let me give you an example of what I am talking about.

Suppose Shelly and Xavier decide to sell Apple Pies.

Xavier decides to sell each pie for $2.00.

Shelly decides to cut the pies into four pieces and sell each slice for 50cents.

Which one is the better deal? Answer: They both cost the same!!!!

Now Shelly decides to raise the price of her slice of pie to $1.00 per slice. Now which is the better deal? Answer: Xavier's pies are half the price of Shelly's Even though it costs $2.00 to get some pie from Xavier and Only $1.00 to get some pie from Shelly. Why, because when you spend $1.00 to buy pie from shelly you only get 1/4 as much pie!!

OK Now here we go……

XMSR has 204,720,000 (204 million) shares of the company for sale. Each share costs $38.00. That means the value of the company, (called the market cap), today is 7,779,210,000 (that's 7.7 billion dollars.)

SIRI has 1,263,120,000 (1.2 BILLION) shares for sale. Each share costs $6.90. That means the value of the company today is 8,715,500,000 (that's 8.7 Billion dollars).

So if everything was equal which would be the better deal???? Answer XMSR

Of course right at this moment in time the market is saying that everything is not equal and it is willing to pay a premium for SIRI stock over XMSR. To say that SIRI is cheaper than XMSR is silly. You are just buying a smaller part of the company per share.

One last thought, If SIRI went to $38.00 per share like XMSR is today, the market would be saying that the SIRI company would be valued at 45,600,000,000 (that's 45 BILLION dollars). That's twice as much as General Motors is worth.

You can find out the number of shares for sale and the market cap of any company right here on the Fool. Just go to quotes and select the Snapshot option.

Hope this helps!!!

Cliff






Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.