Leaked memo tells a sorry stock option story!<\/p>\n
<\/p>\n
A leaked memo reveals their new stock option plan is based on a $20bn value for Twitter rather than the $44bn Elon Musk paid to take the company private last year.<\/p>\n
Ouch!<\/p>\n
You can see why, when we are valuing stock option schemes (including growth shares), we often add an impairment for risk as to value of the company in the future.<\/p>\n
It just makes sense\u2026<\/p>\n
Private company values can experience dramatic rises and falls in short spaces of time. This is not just based on external factors, but also on the company\u2019s own fundamental performance.<\/p>\n
Indeed, Twitter has suffered a collapse in turnover and a 75% cut in the workforce.<\/p>\n
What\u2019s more, we are now in the down phase of the cycle for technology stocks and can expect more bad news before the market turns.<\/p>\n
Outside this subset the picture is much more mixed\u2026<\/p>\n
Here in the UK the unexpected rise in inflation in February remains another concern, although I am pleased to report that many of our clients are now preparing forecasts which have been adjusted for inflation.<\/p>\n
Andy Haldane, former chief economist of monetary analysis at the BoE, who is considered a bit of an eminence grise on the issue, was talking confidently in the media over 25\/26 March, that UK inflation is expected to start falling soon.<\/p>\n
We continue to monitor this issue closely.<\/strong><\/p>\n The Twitter story also raised another important issue that is now becoming relevant to valuers: the rise in availability of a secondary market for trading both private company shares.<\/p>\n Musk is proposing in the stock option scheme that Twitter staff will be able to trade their shares every six months.<\/p>\n Of\u00a0course, they will need to have exercised their options to gain title to the shares, so I suspect putting in place this trading facility won\u2019t yet be urgent.<\/p>\n We know Asset Match well which is becoming the go to place for private company secondary trading solutions in the UK and if anyone would like an introduction please do\u00a0let\u00a0me know.<\/p>\n As valuers, we are very curious about secondary trading in private company shares. There are a number of issues to think about.<\/p>\n What does liquid mean?<\/strong><\/p>\n If a company only trades twice a year, between the trading windows, what is more important to determine the price on the day of the valuation report \u2013 the price set last time the shares were traded or M&A transactions in the sector in the last two months. The nature of the secondary trade also matters.<\/p>\n Is it a truly open market with thousands of willing buyers\u00a0and sellers, many of whom would fit HMRC\u2019s definition of a\u00a0\u201cprudent investor\u201d?<\/p>\n Or is it a very restricted market with the only buyers and sellers being existing shareholders?<\/p>\n Is there a spread between the bid and offer price?<\/p>\n Do the transaction fees make a meaningful difference?<\/p>\n And more\u2026<\/p>\n","protected":false},"excerpt":{"rendered":" Leaked memo tells a sorry stock option story!<\/p>\n","protected":false},"author":2,"featured_media":147,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-78","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.athla.co.uk\/insights\/wp-json\/wp\/v2\/posts\/78","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.athla.co.uk\/insights\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.athla.co.uk\/insights\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.athla.co.uk\/insights\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.athla.co.uk\/insights\/wp-json\/wp\/v2\/comments?post=78"}],"version-history":[{"count":11,"href":"https:\/\/www.athla.co.uk\/insights\/wp-json\/wp\/v2\/posts\/78\/revisions"}],"predecessor-version":[{"id":168,"href":"https:\/\/www.athla.co.uk\/insights\/wp-json\/wp\/v2\/posts\/78\/revisions\/168"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.athla.co.uk\/insights\/wp-json\/wp\/v2\/media\/147"}],"wp:attachment":[{"href":"https:\/\/www.athla.co.uk\/insights\/wp-json\/wp\/v2\/media?parent=78"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.athla.co.uk\/insights\/wp-json\/wp\/v2\/categories?post=78"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.athla.co.uk\/insights\/wp-json\/wp\/v2\/tags?post=78"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}