Enterprise Value as Market Value
Another system of calculating market value, which when calculated this way is also called enterprise value, is
(i) (shares outstanding X share price) + long-term debt – cash
It may not make immediate sense to add market capitalization to long-term debt and subtract cash, but it represents what you would have to pay to buy out all of a business’ shareholders and long-term creditors (be the only owner and not owe any money), less the cash that you would get along with the company, since you can use that to offset what you spent on the business.
With this method, we would have a starting value of
(607.190 million X 2.13) + 4.874 billion – 1.341 billion = 4.826 billion
AMD is transferring $1.2 billion of debt to TFC, but AMD owns 34.2% of TFC, so the amount of debt they no longer own works out to $790 million. Market cap is affected as above with an extra $200 million, but we’ll take $125 million back out because AMD is getting it in cash (we’re ignoring the penny per warrant, or $350 thousand, AMD would get from Mubadala for converting the warrants)
(2.13 X 700.19 million) + (4.874 - .790) billion – (1.341 + .125) billion = 4.109 billion
As with assets, market value, at least in this interpretation, actually goes down.