[ELI5] If Apple is a trillion dollar company, why isn’t the owner of Apple a trillionaire?
In: Economics
Its market cap is about 1.3 trillion right this instant, BUT that is simply a math equation: outstanding shares X price per share. It is a rough estimate of what investors think a company is worth, but may not be an actual example of how much the company is physically worth in the “accounting” sense. This can trick people sometimes.
One example of it’s trickiness is like this: lets say Company X has a million outstanding shares trading at $50 each, So its market cap is $50 million. But Company Y comes in with a buyout offer, offering to pay $80/share to buy up all the stock and therefore literally own Company X. Company X’s board of directors turns it down, But because of this offer the share price has floated up to about $70/share. So the company has done nothing different doesn’t own any new assets isn’t generating any more revenue than normal, but is now a $70M company simply by virtue of a buyout bid.
If you add up the total assets and equity (stuff that’s partially owned to really simplify it) and even gross profits for 2019, it doesn’t add up to $1T. Investors just *value* it at over $1T. Sorta like Bitcoin, each Bitcoin costs so much because it is believed to be that valuable, again to really give a simple explanation.
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