Allocating Business Value to Multiple Classes of Equity


Perhaps you believe you know what your company is worth. But do you know what the stake of the common shareholders is worth? How about the value of the preferred shareholders? What about the value of the redeemable convertible preferred stock? How are these values affected by liquidation preferences? By various dividend rights?

Through case studies, this session demonstrates–in unparalleled detail–the application of the Options Pricing Model (OPM) to allocate business value to multiple classes of equity. This course discusses OPM inputs such as option pricing inputs and capital structure inputs.




About the Course:

The following are among the issues reviewed:

  • What measures can be taken to restrict the overvaluation of preferred shares and undervaluation of common shares?
  • How would you esteem alternatives to take an interest in an organization’s future development?
  • How does apparition stock influence the valuation of equity classes? 
  • How is volatility determined when the comparables are public organizations and the subject organization is private? 
  • Is it better to calculate volatility based on the vacillation of earnings or stock prices?
  • What is the role of dividends when calculating call values?
  • How do you ‘gross up’ incoming cash from the exercise of outstanding options?
  • How does a company’s capital structure affect volatility?
  • How do you determine the risk-free rate?
  • How do you determine the value of an option inside an option (e.g. when the company is pursuing speculative research and that company is most appropriately valued as an option)?

Course Length: Approx. 2.0 hours

About Author: David Anderson, Director, EisnerAmper, LLP

David Anderson is a Director at EisnerAmper, LLP. David Anderson is a Director in the firm’s Litigation Services Group. He has prepared hundreds of qualified valuation reports for financial reporting, tax reporting, M&A and litigation support purposes, and has testified as an expert witness. At EisnerAmper, LLP, he also has responsibility for the review of external specialist valuations in the context of audit engagements.

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