While checking in on my IVV order, I noticed Ford is having a bad day. Check out these market caps:
Ford (F): $13 Billion
General Motors (GM): $12 Billion
Google (GOOG): $130 Billion
Ouch. Google could buy both Ford and GM and not break a sweat. Hmm… Google + Cars = ?? Isn’t it weird how GM and Ford used to represent America’s economy, and now Google does instead. I mean, indirectly they employ me and millions of others!
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Well, they have a larger market cap…but that doesn’t mean they could really buy them. Besides…Ford and GM aren’t profitable and both have large amounts of debt…if Google bought either…they would be taking on that debt and non-profitability. Google would then tank because shareholders would wonder what the heck Google was thinking buying such garbage companies.
Yeah, but what if Google made every car a WiFi repeater? We’d have internet access everywhere, with Google in every car. That’d be cool 🙂
No, Google can’t buy Ford or GM, because it would also have to take on Ford’s massive pile of debt ($154.33 Billion) or GM’s massive pile of debt ($285.75 Billion)…
As anonymous pointed out, the massive debt load would make any merger impossible. Often times the “assumption of x dollars of debt” detail is left out of the merger headline and buried in the article. If GOOG made such a huge purchase, they’d be trading in their equity (which is expected to grow in the high double digits) for equity that at best will grow in the very low single digits (basically imagine GOOG with a 9.0 p/e ratio). GM and F still represent a huge portion of the US economy. Just look at revenue instead of market cap.
Market cap is overrated when talking about the fundamental strength of a company. Anyone remember when CISCO was valued at $500 billion?
GM, Ford, Boing, and GE are considered industrial icons where Google and Microsoft are brain marks. After all software companies’ worth are more to their concepts and ideas. Even though we do value intellectual properties, we still think those who can create tengible things like airplanes and race cars are cooler and more prestigious. This is not something can be measured merely by market cap.
Still waiting for the completion of the story “Always Put Everything In Writing
With the relative value of each company’s stock, Google could easily(?) gain a controlling interest of both companies.