Pre - IPO Valuation Question
I have a valuation question her and would greatly appreciate some advice!
The business I work (say ABC co) invested $1m into a cash-desperate pre-IPO company through a convertible loan (no coupons & not secured). Upon IPO, which is expected in 6 months, the loan is compulsorily convertible to shares at 50% discount to the IPO price (whatever the IPO price). In the case of the IPO not being successful, ABC will required to redeem the loan at 50% interest in 1 year.
Now its year end and I need to value ABC’s $1m investment but I can’t seem to see the best way to value this as neither of the common valuation techniques are applicable.
In essence the value can either be $2m at IPO (given 50% IPO discount) or $1.5m in 12 months if the IPO is not success and ABC redeem the loan; or zero if the pre-IPO company liquidates at any time between these events.