How do I find out how much this stock is realistically worth?
So about 10 years ago, during the dot com boom, I was involved with a startup that issued some stock for early employees and seed money investors…
They’re still around and have since received a few rounds of financing and are currently making money… even in this economy.
They aren’t publicly traded anywhere that I’m aware of, and so I’m just wondering how I would determine their worth and how I might liquidate them if I so chose…
Thanks in advance for the help… and yes, I love ellipses.
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3 Answers
It is worth the par value listed OR whatever someone will pay for it. Unfortunately, with a private company it is difficult to value stocks. You could, theoretically, look at a balance sheet, subtract the liabilities from the assets and divide by the number of shares outstanding, but with no or limited market out there, it is probably a buyers market. Plus, there may be restrictions on trade of stock that make it even more difficult.
There are several ways to estimate the intrinsic value of a stock. (Please keep in mind that the value of a stock is changing all the time and all methods are estimates).
The simplest method is the current selling price. That is what the stock is worth, because people are paying that price now. But, the selling price is a combination of the intrinsic value and expectations for the future price movement of the stock.
Another simple method is Book Value. This is the value of the stock related to the book (or accounting) value of the company. If the company closed today and had to sell all its assets (buildings, machinery, vehicles, etc), what would one share of stock be worth.
Even more esoteric methods involve finding ratios for common measures. like PE or EPS. For example, the price of the stock will remain near a certain ratio of the EPS, say 15 times the EPS. So if the earnings per share go up, the price of the stock should go up proportionately.
All stocks sell at a price that is a combination of the inherent book value of the company, the value of undelivered sales and an additional value base on the expectation of future earnings and growth. Since no one can know what the future portion is really worth, all values we put on a stock are estimates.
You could offer to sell it back to the company, or to another employee, and see what they are willing to pay for it.
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