I just saw a post that said Tesla stock is only worth 1/5 as much as it’s valued as. It doesn’t make sense to me.
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“Shares” are pieces of the company divided up and sold. If you have 1 share you own one tiny piece of the company.
Now what if you wanted to own the company? Just you, all to yourself? You would have to buy ALL of the shares in existence. It will cost you the share price multiplied by the total number of shares you have to buy.
So that’s how much the company cost to buy outright. Is it worth it? You might feel that price is too high. That is “overvalued.”
In reality you take assets, revenue, holdings, all sorts of stuff that have “value” and try to figure out if the actual monetary value of a company is reflected in the share price.
For what it’s worth, “overvalued” is extremely common in today’s market where supply and demand alone can make a share price much higher than it would be otherwise.
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