Impact of fully diluted market capitalisation on enterprise value
Hello,
I was wondering what was the impact on enterprise value of fully diluted market capitalisation. Please find below a simplified numerical example of my question.
For those using CAPITAL IQ, it looks like they consider in both cases the same market cap to enterprise value bridge (example with TESLA on a spot market cap basis) and I'm trying to understand why.
Thanks a lot for your help
To calculate dilution you should use the treasury stock method where the cash proceeds from exercise will be used to retire outstanding shares, which reduces the diluted shares outstanding.
Holy shit are you an MBA associate?
Guys,
Thanks for your answers
My question was regarding taking or not into account in the bridge the additional cash resulting from conversion of the options.
If you consider the market cap increase, shouldn’t you consider a cash increase?
Yeah you use the cash so you arrive at 386. Can also try retiring shares with the 24 in cash and will arrive at the same result
Yes, exactly. Typically calculate fully diluted shares using treasury stock method which would use the cash to retire the shares. But yes, either way will yield same EV as subtracting the additional cash.
If you repurchase the shares, it means you’d have own shares and unless I’m mistaken, they have no value and shouldn’t be taken in market cap, no?
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