Hello, I’m looking for a bit of help on how to value employee stock options within the context of a merger model. I know most companies will use Black-Scholes to come up with an estimated fair value for their options outstanding. Now should I be using this figure or should I base my estimate on the expected offer price and weighted average exercise price of the options? So if offer price < exercise price, cost of acquisition would be $0, otherwise it would be offer price * X number of incremental shares after exercise. Any help with this would be appreciated, thanks.
My company is being purchased and all OTM options are being cancelled.