PALM Valuation...
There will be 570 M shares outstanding and 23 M shares of float after the IPO. This is a HUGE number of shares outstanding, considering 3Com has only 366 M shares after 2 splits!! The 570 figure is what makes the market cap, and the basis for these calculations. At $16 a share, that makes it 9.1 Billion dollars of market cap. If PALM goes to $80 (5 times 16 dollar IPO price), that would make the market cap 45.5 Billion dollars!! Lets compare that to some other market caps based on today's closing price;
CPQ 42.6 B$
Extrem networks 4.5 B$
Foundry Networks 13.1 B$
Juniper 36B$ !!
Lucent 161B$ !!!
Yhoo 87 B$
Comparing it to other companies, even ones with similar growth rates, 45.5 billion is a bit too much. Based on those numbers $100 stock price should really be far fetched?! However I think with all the hype, we could see a 30 B$ market cap, that would put PALM stock price at $52 1/2.
Today's overall 3Com market cap is $26.7 Billion (including PALM). Take 9.1 Bs for palm, that leaves $17.6 B for 3com. If palm goes to $80 on its IPO day, that means 3com could have a market cap of 17.6x5 =$88 Billion (based on today's prices)!! That means 3com stock price would be $$215 ($88B/366M shares outstanding), probably a little less since 3Com will own 93.3% (not 100%) of palm after IPO. BUT, COMS market cap has more than doubled since the announcement and allot of the appreciation is already in the stock. Lets say it doubled since the announcement. That would mean the real 3Com portion of today's market cap is around $ 8.8 billion (17.6 /2). That means 3Com could go up to $107 (if PALM goes to $80).
If Palm stayed at a 30 billion market cap and its stock at $52, 3Com would be valued around $69.55.
With 570 M shares outstanding, I can't see how the stock could go above $100!!!
I hope I'm wrong, but that's what my numbers tell me.
Do you guys see any big holes in the above numbers?
PY// |
