Tesla raised eyebrows in 2017 as its market valuation (price of all shares) exceeded that of its much larger rivals, traditional car manufacturers General Motors (GM) and Ford (see the article below). Tesla produced 76 thousand cars in 2016, compared to GMs 10 million and Fords 6.6 million. That means that Teslas production volume was a mere 0.76% of GMs.

Yet the market valuation of $51 billion exceeded GMs $50.9 billion. It looks like the acquisition of Solar City, although a drag on Teslas finances, didnt hold its share prices down for long.

When looking at the profits Tesla and GM generate, even more questions arise. Tesla has accumulated $1.9 billion over the last three years, while GM had a net profit of $23 billion over the same period. Looking at the problem from a cash flow perspective, Teslas value shouldnt be anywhere close to $51 billion; it should actually be negative. However, using the cash flow valuation method isnt the best way to approach this problem, as the losses were accompanied by strong expansion in the electric car market, and the valuation is a reflection of investor belief in the bright future of the company. And at the same time, they dont seem to have the same optimism for the futures of GM and Ford: their valuations are much lower than their profits would suggest. To see why, just compare GMs profits and valuation $23.9 billion in profits over 3 years and a value of $50.9 billion. That would suggest that GM is able to make as much money as it is worth in just over six years, or close to seven, if discounting is used. The only way to explain it is that investors are expecting profits to fall very quickly.

Your task is to find a similar case to Tesla, where there is a clear disparity between profits and market valuation. The company can be one that is publicly traded or, preferably, one that has been recently acquired for a price not explainable by its profits.

Instructions:-

You should post your initial response by the date indicated above. Please be sure to reference your sources in appropriate APA formatting and to provide substantive evidence of any claims that you make. Where appropriate, include personal anecdotes, statistics, and references to additional reading or materials. After you have posted your initial response, visit the forum again over the coming days to read the responses of your peers. You should respond to at least two other students by asking them to elaborate on a point, providing a counter-argument, suggesting a topic for debate.