Posts filed under ‘Valuations’
The Brenner Group Celebrates 25 Years
As I reflect back on the past 25 years, the company and I have seen many changes in Silicon Valley. The types of industries that venture firms invest in has changed dramatically, and there have been a number of business cycles – both up and down. (more…)
What is a Qualified Appraiser? Part Two
In the last blog post, we discussed the notion of a qualified appraisal that was introduced by the Pension Protection Act of 2006. Such an appraisal needs to be prepared by a qualified appraiser.
In this post, we will discuss the definition of a qualified appraiser. (more…)
What is a Qualified Appraisal? Part One
Taxpayers may deduct the fair market value (as determined by a qualified appraisal) of property that they contribute to charity from their taxable income. The Pension Protection Act of 2006 added the notion of a qualified appraisal to the tax code. A qualified appraisal made by a qualified appraiser is generally necessary to support the value of noncash charitable contributions of $5,000 or more. (more…)
December 20, 2011 at 2:50 pm Gunther Hofmann Leave a comment
Insider Trading – Are VCs Dealing Themselves Inside Rounds?
Brian Broughman and Jess Fried put forth a study recently on insider rounds in venture-backed companies: Do VCs Use Inside Rounds to Dilute Founders? Some Evidence from Silicon Valley.
As the name implies, inside rounds are rounds of investment by existing investors, versus outside rounds that are led by new investors.
In our valuation practice, we are often confronted with clients having gone through inside rounds, and we need to make a determination if the pricing of those investments provides an indication of value of the equity of a company (regardless of which class of shares; but usually invested as preferred equity). Each case is different, but often such an investment is not a good indicator of value as it lacks arm’s length characteristics.
Although Broughman and Fried only cover a very limited geography (Silicon Valley), a very limited time frame (companies that were sold in 2003 and 2004), and had very specific exit circumstances (M&A), it provides a welcome quantitative analysis of such inside rounds. (more…)
The Latest IPO Bumps
This is my second blog posting on IPO Bumps of VC backed companies. The IPO Bump refers to the difference between a stock option’s exercise price and the price of the company’s shares at the IPO. There has been some speculation on whether 409A rules (among other factors) are leading to the end of the IPO Bump. However, a sampling of recent tech IPOs indicates IPO Bumps are alive and well, although the magnitudes of the Bumps can differ significantly among IPO issuers. (more…)
Recent IPOs and the IPO Bump
The “IPO Bump” refers to the difference in the exercise price of stock option grants and the offering price at the IPO. The theory is that employees are sometimes granted stock options with strike prices that are at a discount relative to the IPO price (especially in the period immediately preceding the IPO). There has been some speculation on whether 409A rules (among other factors) are leading to the end of the IPO Bump.
IRC 409A requires the company to estimate the fair market value of its stock at the time of an option grant. As a venture capital backed company grows successfully and starts aiming for an IPO exit, the fair market value of the stock should grow as well, in theory. If the company had perfect foresight, the discount relative to the IPO price should decrease the closer the company gets to an IPO. (more…)
Where Are All the Tech IPOs in 2011? Part Two.
In my last post we examined the IPO history in Silicon Valley and wondered why we have not seen more IPO activity this year. There are some big, well known consumer internet companies poised for IPOs with ostensibly favorable market conditions, but none have gone out. How come? My take is there are three key several reasons:
1. Institutional buyers are very cautious, and their liquidity might still be an issue.
2. These are still young companies and need more time to cement their business and financial models and don’t need the distraction.
3. They don’t really need to go public. (more…)
Where Are All the Tech IPOs in 2011? Part One.
2011 started off as a year anxiously anticipated by investors and tech-watchers alike: the tech IPO market would return. Typical of the sentiment was the DealBook post on Dec 30, 2010: Is 2011 the Year of the Blockbuster Tech I.P.O.?
Several positive indicators underscored that sentiment: rebounding stock market, low interest rates and a poor real estate market suggesting that growth stocks could be attractive investments, several big name private companies were raising institutional funds at billion dollar valuations, and anecdotally the local law firms all spoke to the resurgence in their S-1 filing activity and often referred to a healthy “IPO pipeline”. So confidence in a tech IPO resurgence was high. But with a third of the year gone, there have been few notable IPOs and while activity is up over 2010, we’ re not seeing the kind of breakthrough IPO activity including the big name consumer internet players that most had expected. What happened? (more…)
When Black Scholes Falls Short
Every now and then, the SEC lets the world know their interpretation of generally accepted accounting principles. More often than not, this happens in speeches by SEC employees, and the resulting guidance is referred to as “Speech-GAAP”. (more…)
Bubble Watch – Part 3: Cloud Computing
In our first two installments of bubble watch, we looked at cleantech and social gaming. Of course, our trilogy wouldn’t be complete without also considering cloud computing. (more…)
