If I own shares in a company. Let’s say Alphabet (Google) and they invest in another company say Tesla. How does that affect my holdings in Alphabet.

For example if the Tesla share price goes up does that increase the value of the Alphabet shares or does this only happen if they sell them? Basically I just want to know if they invest in a winner or loser how it affects me as a share holder?

3 Answers 3


Ideally, yes, the price of the owner's stock would increase to reflect the increased value of the assets it holds. If Alphabet in this example owns $1 billion in Tesla stock, then the number of Alphabet shares * Alphabet's share price should be $1 billion plus whatever value the market places on the rest of Alphabet's business.

In practice, this doesn't always happen. For example, at one point in 2015, Yahoo was worth ~$1 billion less than the stakes it held in other companies. When that happens, someone will usually do something to unlock the value. Either the company itself will spin off the valuable assets into a new company or someone else will initiate a hostile takeover in order to sell off the assets or the market will realize the parent company's stock is undervalued and bid up the price to cover the underlying assets.


The value of every investment plays a role in determining the ultimate value of the investor (Alphabet in your example). Lets take a step back and review what the market is doing on a daily basis when you see stock price moves. Each buyer is essentially making a bet on what they think the company's financial statements are going to look like over a couple of quarters or years (duration depends on the type of company i.e. mature or growth).

So the answer to your question really is...unfortunately...it depends. Using your example, if Alphabet (~$870bn mkt cap) buys 1% stock in Tesla ($135bn mkt cap), without doing any math we can quickly surmise that the investment would be too insignificant relative to Alphabet's entire business to drive any attributable stock price moves.

However, if Alphabet buys a 10% stake worth $13.5bn, what happens? Lets assume Tesla rises 30% the next day (which would be a huge move), the impact of that move on Alphabet's holdings would approx +$4bn which is less than 0.5% of Alphabet's mkt cap, and too small to try to establish any causal relationship with Alphabet's price moves.

If we keep repeating the above calculation with higher levels of ownership, or even a different company with a higher market cap, you'll get higher impact to the investing company until, maybe you're able to say, the move (x) in this company (Tesla), is responsible for a portion of the move (y) in the other company (Alphabet).

However, I would argue, that unless a company's primary business is investing in other businesses, or it makes a small investment in a company that ends up becoming a publicly traded behemoth (happened to Yahoo and Softbank holding Alibaba shares) the above should not happen. Shareholders invest in companies with a somewhat well defined business mandate, not to turn around and invest in other public companies unless it is for a strategic purpose (in which case the daily moves should be secondary to the business execution/growth story).

If you think about it critically, it is a highly inefficient use of capital for one public company to invest in another. The shareholders perspective absent a strategic investment rationale, sounds like - If I want to be long Tesla, I would rather do it myself than hand my money over to Alphabet to do it for me. At the point one company's investments in another public company begins causing attributable daily moves, I would argue as a shareholder that the holding needs to be divested to streamline the business and give me a clearer view of my investing risk.

Furthermore, trying to calculate this type of attribution is a bit futile. In the examples above, we're taking a very simplistic view of the investing company's portfolio, and yet moves are not easily attributable to specific investing activities. When you then consider that Alphabet might have 1% of Tesla, 2% Company B, 3% of Company C and they're all moving in different directions on any given day, in addition to lots of other opposing factors - Wall Street loves management, but an anti-tech bill just passed on the same day Alphabet won a massive govt DoD contract, spun off one business for a massive profit and wrote off all investment in a failed business line..... you would realize that it is never that simple.


Theoretically, the fundamentalists would expect the price of Alphabet to increase, commensurate with the increase in value of the TSLA share position.

However, the market is an auction and the beliefs of buyers and sellers will dictate how much the price of Alphabet rises or drops.

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .