Share Valuation
Share Valuation
Valuation Situations
1. Initial Public Offerings (IPOs)
An initial public offering is the first sale of shares by a company to the public. The shares then become publicly traded.
2. Management Buy-outs (MBOs)
A management buy-out is a form of acquisition in which the existing managers of a company acquire a large part or all of the shares of the company.
3. Management Buy-ins (MBIs)
A management buy-in is a form of acquisition in which a manager or management team from outside the company raises finance, buys the company and becomes its new management.
4. Spin-offs
A spin-off is a situation in which a company sells stock in a wholly-owned subsidiary or dependent division, so the subsidiary or division becomes an independent company. The parent company may or may not maintain ownership in the new company, and may have many reasons for spinning it off. For example, it may wish to exit one industry to expand in another, or it may simply wish to profit from the sale. 5. Equity Carve Outs
An equity carve-out is a reorganization in which a company creates a new subsidiary, takes it public, and retains a majority share. An equity carve-out increases access to capital markets, enabling the carve-out subsidiary to finance its growth without issuing parent equity. It gives the subsidiary a degree of autonomy and retains its access to parent company resources.
Share Valuation Models
1. Dividend Valuation Models
Discounted Dividend Model (DDM)
Constant Growth DDM
Differential Growth DDM
2. Earning-based Models
Earnings Capitalisation without growth
Earnings Capitalisation with growth
Price-Earning Multiple Model
3. Free Cash Flow Models
Discounted Free Cash Flow to Equity (FCFE) model
Discounted Free Cash Flow to the Firm (FCFF) model
4. Book Valuation (Net Asset Value) Model
Discounted Dividend Model
The dividend discount model (DDM) is a method of valuing a company based on the theory that a stock is worth the
Valuation Situations
1. Initial Public Offerings (IPOs)
An initial public offering is the first sale of shares by a company to the public. The shares then become publicly traded.
2. Management Buy-outs (MBOs)
A management buy-out is a form of acquisition in which the existing managers of a company acquire a large part or all of the shares of the company.
3. Management Buy-ins (MBIs)
A management buy-in is a form of acquisition in which a manager or management team from outside the company raises finance, buys the company and becomes its new management.
4. Spin-offs
A spin-off is a situation in which a company sells stock in a wholly-owned subsidiary or dependent division, so the subsidiary or division becomes an independent company. The parent company may or may not maintain ownership in the new company, and may have many reasons for spinning it off. For example, it may wish to exit one industry to expand in another, or it may simply wish to profit from the sale. 5. Equity Carve Outs
An equity carve-out is a reorganization in which a company creates a new subsidiary, takes it public, and retains a majority share. An equity carve-out increases access to capital markets, enabling the carve-out subsidiary to finance its growth without issuing parent equity. It gives the subsidiary a degree of autonomy and retains its access to parent company resources.
Share Valuation Models
1. Dividend Valuation Models
Discounted Dividend Model (DDM)
Constant Growth DDM
Differential Growth DDM
2. Earning-based Models
Earnings Capitalisation without growth
Earnings Capitalisation with growth
Price-Earning Multiple Model
3. Free Cash Flow Models
Discounted Free Cash Flow to Equity (FCFE) model
Discounted Free Cash Flow to the Firm (FCFF) model
4. Book Valuation (Net Asset Value) Model
Discounted Dividend Model
The dividend discount model (DDM) is a method of valuing a company based on the theory that a stock is worth the