Valuation 101: Common Stock Articles
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Arcstone Articles: re-organized, made better!
At long last, we've reorganized the Arcstone Articles to read much more like they ought to: that is, ordered by topic instead of by date. We'll keep tinkering. Heck, we may completely remodel. But for now, you'll want to know that all of our articles are organized into the following...
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1. Protecting Yourself from the Pitfalls of 409A: An Appraiser’s View
Over the last few years, both public and privately-held companies have struggled with the complexity of incorporating equity participation into compensation plans for employees. Terms like 409A, Practice Aid, qualified appraiser, and safe harbor methods are suddenly part of the everyday lexicon of most compensation professionals. At the same time,...
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2. Poisoning the Well
Be careful with what you say. Even if you don't mean to, you can jeopardize our relationship. Yesterday I received an email from a client with whom we enjoyed working in 2006. Apparently it was time to get a fresh valuation. Occasionally I am aghast at what I hear coming...
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3. Your projections matter. Now.
There is a growing emphasis on the forecasts of private companies. Get with the program. Here’s a couple of valuation truisms every CFO should know. Valuations are often highly reliant on the forward-looking projections of the client, Valuation reports are undergoing scrutiny in the financial reporting realm as never before....
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4. Fair Value, Fair Value and Fair Market Value
Understanding Standards of Value. When you obtain a valuation, you're getting it for a certain purpose (or purposes). Understanding that purpose allows us as your service provider to define the appropriate Standard of Value by which our work will be guided, and judged. Sometimes various standards of value can conflict...
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5. Dual Purpose is de rigueur
The conflict (and resolution) of competing tax and GAAP standards of value. Occasionally, we get asked to opine on the state of our industry and prevailing best practices. We’re in a fairly good position to speak to the issues, being at the crossroads of compliance as we are. For while...
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6. Why the Option Pricing Method trumps the Current Value Method
Understanding Methods of Allocation. The Option Pricing Method has complicated the lives of valuation analysts industry-wide. The Current Value (CV) method has been employed in stock option calculations for many years, both by investors and valuation practitioners. For many years it has been considered the tried-and-true method of value allocation....
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7. Valuation Updates: When and How
Recently we participated in a Fair Value forum with our friends and colleagues in the valuation industry at Frank Rimerman, Grant Thornton, Trenwith, Cogent and others. Among other issues, we discussed the common concerns of our clients relating to 409A/123R valuation practices. Our primary concern was how best to educate...
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8. Hey, this price is too low!
The inherent volatility in stock option valuation. We issued a dual-purpose valuation report recently to a management team that we really like to work with, and got back a bit of a surprise. “Hey,” they said, “this option price is lower than the last report you issued. We’ve made progress...
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