Always an exciting and interesting speaker, Dr. Aswath Damodaran (New York University, Stern School of Business) conducted a special three-hour workshop on price versus value last Wednesday. His key point is that business appraisers should look carefully at their work to clarify the distinction between pricing and valuing a business or asset. Damodaran feels there is a growing difference between price and value, which leads appraisers to use the wrong toolkit 80% of the time, he told the audience (both live and via webcast).

Masquerade: He also points out that many pricing decisions only pretend to be valuations. For example, the bankers recently put a price on Alibaba of $155 billion. The illusion that this price came out of a valuation model creates a great deal of confusion. In reality, says Damodaran, what they did was set an IPO price. Another example is DCF “valuations” that rely on EBITDA multiples at terminal value. He calls these “valuations in drag” and worries that any “valuation” that relies on terminal value calculation is price-oriented.

Dr. Damodaran had a lot more to say, and BVR wants to thank him for an excellent and informative workshop. If you’d like an archived version of the webcast, click here.