TSX:HEXO.W.A - Post by User
Post by
Zaybureon Dec 23, 2022 10:17am
181 Views
Post# 35189317
Market Capitalization
Market CapitalizationMC = # of shares X PS. In the case of Hexo,
Pre RS: 600.6M X 0.155= 93M
Post RS: 42.9M X2.17 = 93M (Last Monday morning)
The signifance of the MC is a measure of the enterprise value. If a buyer wants to buy the company outright. ( what Musk did in the case of Twitter) then the enterprise value tells the buyer the value of that company.
Enterprise value = MC + debt - Cash.
Since none of us are in the business of buying outright a company, MC is very little interest. But it helps to know what happens when there is a share split or a reverse split.
EPS to book value is only interesting if you want to buy the company outright and sell it parts by parts in the case that ratio is below market value.
The EPS is more interesting for investors as Q/Q or Y/Y, the EPS can indicate if the company is growing ( investors are willing to pay a higher PS in that case) or is the EPS declining ( Investors are unlikely to be interested, and EPS will more likely decline).
Q to Q, Hexo is losing money, and its market share is declining. That by itself will cause a decline in the SP. Add to that, to stay afloat, it will have to issue more shares, hence putting more downward pressure on the SP.
Keep in mind that the market doesn't care what you feel for that company, the numbers are telling what is more likely to happen in the near future.
Note: a takeove by another company ( TLRY possibly in this case) does not resolve the situation as this takeover company is absorbing a posion pill.