Options: Fair Market Strike Price Valuations
The valuation of stock options' strike price at fair market value requires the use of objective financial methods. The most commonly used approach is the Option Pricing Model and it is used to estimate both the ordinary share value considering the preferred returns that apply to company's preferred shares, and also the discount for lack of marketability.
The Fair Market Value in 3 Steps
Step 1
Reference Valuation
The starting point is the company valuation, which is either determined by a recent fundraising round or must be calculated in the absence of recent capital transactions.
This first valuation is the starting point of our analysis, which will allow us to measure the value specifically different classes of shares.
Step 2
Ordinary Share Value
In the presence of preferred returns in the shareholder agreement - which grants to preferred investors a priority in the liquidation order in case of exit - it is necessary to calculate the difference in value between preferred shares and ordinary shares while taking into account the waterfall specified in the shareholder agreement. The value gap will then be measured by applying option pricing and Black & Scholes mathematical formula.
Step 3
Discount for lack of marketability
The discount for lack of marketability makes it possible to adjust the value of an illiquid security, held by a minority shareholder, having specific rights within the company (lock-up clause, approval, promise of sale, etc.).
This discount is applied on the ordinary share value and is determined by a Put Protective Approach.
Un processus simple et itératif
Collection of information
You will be asked to send us the information required to complete the financial assessment.
Interiew with an analyst
An interview with our analyst is carried out to clarify the information received and methods to be considered.
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Adjustments
A second interview is organized to refine the assumptions made and the results with you.
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Valuation report
A valuation report that presents the results and hypothesis will be sent to you.
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Tailored made
Every business is unique. We use the valuation methods that are best suited to your stage of development and your sector.
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Our valuation reports comply with your local requirements. Our experience guarantees you a reliable and safe valuation.
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Our team is at your side through the valuation process, from offering advice to providing required support. Our focus is to provide the best customer experience.