> A decides to issue corporate bonds, because it doesn't want to dilute its shareholders. B decides to issue new equity instead, because they feel that their company stock is actually overvalued at the moment. Net result: A's market cap remains the same. B's market cap increased by $10B. No difference in future projected earnings/revenue between the 2 of them, but B now leads A in market cap.
Er, there is a difference: A added a bunch of future debt-service expense that B didn't; presumably the expansion that each A & B funded has future expected revenue, but A's future expenses cut into that, while B, with equity financing, didn't add expenses. So, B's actual value should be greater than A's, which the market cap in your scenario reflects.
There are good criticism of market cap as value, but yours isn't one of them.
You've overlooked a number of vital points that render your logic false. I could explain it to you, but I doubt you'll believe me. This is a very technical and complicated issue. Google for Modigliani-Miller Theorem. It addresses exactly the fallacy you've described.
Er, there is a difference: A added a bunch of future debt-service expense that B didn't; presumably the expansion that each A & B funded has future expected revenue, but A's future expenses cut into that, while B, with equity financing, didn't add expenses. So, B's actual value should be greater than A's, which the market cap in your scenario reflects.
There are good criticism of market cap as value, but yours isn't one of them.