A simple explanation about growth shares and insight into what to consider when valuing them.<\/p>\n
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Wimbledon debentures are a notable example of an asset that the buyer might expect to make a return on, even though the debentures are a wasting asset because they have a limited life. In fact, the debentures are so special that they were granted an exemption from the draft anti-touting bill debated in June, distinct as transferrable securities compared to other music and sporting tickets. We think they can be compared to growth shares, due to the potential for return and the likelihood that the debentures are bought by tennis fans who want to invest in the future of Wimbledon.<\/p>\n
Now back to growth shares in earnest. Valuation work related to growth shares, sometimes for immediate issuance and sometimes under EMI schemes., keeps coming at a steady pace. We find our clients love the assistance we can offer in calculating the hurdle through a bespoke hurdle tool where the hurdle hasn\u2019t yet been set. The best feedback we\u2019ve had is that it saves time for clients, to help them make an informed decision.<\/p>\n
We also work with many clients who have already set the hurdle. These valuations are particularly interesting, as sometimes we discover that the shares are already \u2018in the money\u2019. While nobody likes finding that they have a much larger bill to pay than they expected, it leads to interesting discussions about how a hurdle works and why setting it at the equity value after the last raise can be risky.<\/p>\n
So, free of charge, we thought we\u2019d tell you what our simple explanation of how hurdles work for growth shares and how we recommend thinking about it before setting the hurdle:<\/p>\n
Obviously, we think that a third-party valuation is the best first step before setting the hurdle for growth shares, but we hope that the above might be useful for business owners who are new to growth shares and need a simple explanation before getting into the nitty-gritty of the conditions under which the growth shares will be issued. Or, if you have a client who would like to make an informed decision, maybe a bespoke growth share tool would be the perfect step to complement the draft terms!<\/p>\n