Does anyone have any experience valuing warrants for privately held companies? What is the best way to come up with the black scholes inputs? Any thoughts are appreciated.
I have no idea, but I’d like to see the answer to this… too bad we’ve lost Joey…
Use the volitility of comparable public companies. Or you can elect to use zero volitility under Canadian GAAP. Use some reasonable method to estimate the fair value of the share price.
Nah, it seems pretty silly from the start to even have a warrant on an asset that doesn’t have a tangible, tradeable market value (privately held) Furthermore, even if you could pull the volatilty input out of thin air, you can’t rely on black scholes formula for long dated warrants… even on publicly traded companies.
KJH Wrote: ------------------------------------------------------- > Nah, it seems pretty silly from the start to even > have a warrant on an asset that doesn’t have a > tangible, tradeable market value (privately held) > > Furthermore, even if you could pull the volatilty > input out of thin air, you can’t rely on black > scholes formula for long dated warrants… even on > publicly traded companies. So you’re saying its silly that VC deals have warrants?
IF (big IF) there is an ipo in the cards then it might make sense BUT you’d be a fool to buy a warrant on a private company otherwise … so in that sense, warrants are darn silly. But hey they’re minting fools by the minute in this market so what do I know.
Usually the warrants are attached to bonds to improve the interest rate, no? So they’re more or less a lottery ticket in a venture capital case, and if it’s an LBO, then presumably there is a past price history and some hope of going public again.
In that case they’re just deal sweeteners.