Cache Member Level Monday, 04/10/17 06:21:12 AM9 (REPOST)
Re: Monte_Cristo post# 28862
Post #
28867
of 37795 Go
It's been the assumption of some here that JB&ZJMY is going public to raise capital when that may not be the case at all. By going public, key players in the company have an opportunity to be rewarded for their hard work and commitment because public companies are valued at multiples of private companies. It's also much more difficult to sell one's stake in a private company, whereas a public company offers liquidity. Let's take Wang's preferreds, for example. Let's say the company realizes $4B in revenues from the first 100,000 EV order. Wang can convert his preferreds into 750M shares.
I don't know what the profit margin is for EVs or batteries, but let's go with a conservative 10%. And let's use a reasonable 20 p/e for a rapidly growing sector such as EVs. A 10% profit margin on $4B is $400M.
Muliplied by a 20 p/e, we get $8B. If we divide $8B by all possible o/s (if preferreds are converted) or 1.6B shares, we get $5 per share. Wang's 750M shares are then worth $3.75B or almost the entire company's revenues. The figures I used were very conservative too. If profit margins are 20% and p/e 30, then his shares would be worth $11.25B, almost triple the entire revenues. Perhaps he and his partners saw an opportunity to profit more as a public company than as a private company. In the process, they can also reward their employees through stock options which provide an opportunity for them to build wealth as well. Raising capital is only one reason a company might go public, but since the officers of JB&ZJMY don't seem to be short on cash, I think they may have other reasons for taking the company public, such as those I just mentioned, namely valuation and liquidity.
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