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Pegasus
Honorary Master
- Joined
- May 17, 2004
- Messages
- 13,976
Depends on the business plan.
I will make things up here as an example.
If for example you had planned to start Tesla.
Maybe 0.5% of the cars on the road are electric.
You know that governments will require 40% of vehicles to be "carbon free" by 2040.
You have patents and technololgy to create these cars. You know that your ideas will be stolen and other companies will also start producing them, perhaps cheaper or faster.
Do you take it slow and steady like Old Mutual and pay out your 3% dividend every year, or do you go full steam ahead and try to get a huge chunk of that 40% for yourself?
Do you pay out any earnings to shareholders and also get taxed, or do you reinvest them into the business to keep growing? And for good measure then take out low interest loans to grow the business and write off the interest against profit. So the tax man helps you out as well.
To continue as an investor: You did notice Tesla's share price going up over the years even though it didn't look profitable?
Supposing today's Tesla share price is $1.07. The net asset value is only $0.45.
You're not going to buy that share right? It's over valued.
But now analysts are forcasting that the growth rate will be phenomenal.
In 10 years they will have a 5% market share of all new vehicles.
The share will be valued at around $220 then.
Still expensive? rather buy Old Mutual.
