Size-adjusting Volatility
Since the valuation of corporate securities with option-like features issued by the private companies requires an estimate of volatility based upon comparable public companies and the comparable companies are often larger, the use of unadjusted volatilities may understate the volatility of the subject private company. This article provides an up-to-date research review on the need for size-adjusting volatility. We also present a simple methodology to size adjust comparable companies that is easily updated with data ...
Determining the Cost of Blockage by the Market-Derived Blockage Discount Model
Using option models to determine blockage discounts has been a common practice for over 20 years. As with any technique, periodic updating and improvement is to be expected. We hope this article contributes to this end. The Market-Derived Blockage Discount Model presents a mathematical means for determining the appropriate selling period in a blockage “dribble out” analysis. If we sell too much at one time, the price impact is too great. If we create too ...
A General Option Valuation Approach to Discount for Lack of Marketability
A general option-based approach to estimating the discount for lack of marketability is offered. It is general enough to capture maturity, volatility, hedging availability, and investor skill, as well as other important factors. The model is shown to contain several option-based models as special cases. The model also contains two weighting variables that provide valuation professionals much needed flexibility in addressing the unique challenges of each nonmarketable valuation assignment. Selected prior empirical results are reinterpreted ...
ESOP Forms in Contention While Stock Value Plunges
The Food for Less ESOP provides for annual valuation of the stock, or more, often if the committee believes the value of the stock has changed substantially.
Mitchell v. Falley's
One issue in this case is whether the defendant's ESOP was required to pay plaintiffs based upon the December 31, 1991 valuation as opposed to a subsequent valuation date.