In India Government Running Landline Telephone companies are Examples for this video.They are not making a money still Government is Running them for a social pressure few Years Back.
Yes, the number shown at 7:59 was wrong but the Excel file has it correct. It is intended to be the Implied Equity Value (the calculation at 7:59 missed row 15 at the top).
That's a really broad question that is difficult to answer in the short comments here. It depends completely on the metric and what it represents. Generally, if someone is buying or selling something (a stock, asset, etc.), its selling price cannot be negative, so $0 tends to be the minimum. But individual components of companies, assets, etc., may be negative.
At last slide you mentioned that we shouldn't use traditional valuation method when equity is negative, so how to value a company if it has negative equity?
Companies with negative equity are usually distressed, so methodologies like Liquidation Valuation might be more appropriate... or something like a DCF with heavy discounts applied to account for the distress.
I am valuing Tesla Inc. and in my financial model, the Implied Enterprise Value and Implied Equity Value turned out to be negative, in that case a implied share price of 0 is not worthy. What should I do?
Hey good vid, i just had one question, i noticed that you explained what happened if implied EV is negative by doing the DCF, however i dont think you explained if current EV is negative: what does it mean when net debt exceeds MC, is the meaning the same for if implied EV is the same? That the business is generating negative cash flow in the future?
It means the business is likely to run out of cash and fail in the near future (in most cases). This is why negative Enterprise Value is probably most common for high-risk biotech companies.
@@abdulrahmany4315 I would have to see the company to say. But this sounds like a very unusual scenario / something that might be explained by a one-off event such as a breakup or divestiture / spin-off.
It depends on the time frame you're using. The general assumption with negative TEV companies is that not only will they fail / be liquidated, but they'll also consume a lot of capital along the way before that happens. But there are exceptions.
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In India Government Running Landline Telephone companies are Examples for this video.They are not making a money still Government is Running them for a social pressure few Years Back.
Shouldn't "Implied Equity Value" at 7:59 be called "Net Debt" instead, resulting in an implied equity value of -290.6 or am I getting it wrong?
Yes, the number shown at 7:59 was wrong but the Excel file has it correct. It is intended to be the Implied Equity Value (the calculation at 7:59 missed row 15 at the top).
when metrics values are -ve , how to know whether they are actually negative in real or there is requirement to change the method?
That's a really broad question that is difficult to answer in the short comments here. It depends completely on the metric and what it represents. Generally, if someone is buying or selling something (a stock, asset, etc.), its selling price cannot be negative, so $0 tends to be the minimum. But individual components of companies, assets, etc., may be negative.
At last slide you mentioned that we shouldn't use traditional valuation method when equity is negative, so how to value a company if it has negative equity?
Companies with negative equity are usually distressed, so methodologies like Liquidation Valuation might be more appropriate... or something like a DCF with heavy discounts applied to account for the distress.
I am valuing Tesla Inc. and in my financial model, the Implied Enterprise Value and Implied Equity Value turned out to be negative, in that case a implied share price of 0 is not worthy. What should I do?
Set the implied share price to 0 in that case.
Hey good vid, i just had one question, i noticed that you explained what happened if implied EV is negative by doing the DCF, however i dont think you explained if current EV is negative: what does it mean when net debt exceeds MC, is the meaning the same for if implied EV is the same? That the business is generating negative cash flow in the future?
It means the business is likely to run out of cash and fail in the near future (in most cases). This is why negative Enterprise Value is probably most common for high-risk biotech companies.
@@financialmodeling what if a company has a positive free cash flow for years and negative enterprise value ?
@@abdulrahmany4315 I would have to see the company to say. But this sounds like a very unusual scenario / something that might be explained by a one-off event such as a breakup or divestiture / spin-off.
I was under the impression that there is still enough cash to cover the loses
It depends on the time frame you're using. The general assumption with negative TEV companies is that not only will they fail / be liquidated, but they'll also consume a lot of capital along the way before that happens. But there are exceptions.