Lyft IPO at 22b, per share price of $72 How can someone arrive at this number ? If it is based on future income , how far or rather how many years of discounted income is included to arrive at this valuation ?
Stock price * number of outstanding shares = mcap
@google I am looking for source calculation? How do you arrive at the stock price in first place for freshly issued IPO ? There has to be some common ground or formula to it , versus some random number thrown out
I think it's based on the the prices investors paid in the last round more than anything else.
Formula is same regardless of IPO or not. Only difference with IPO is general public can buy vs only select few in private rounds. But in both cases, it is reverse engineered value. You take the valuation of the company that you are aiming for and divide it with the number of outstanding stocks. That is the value of the stock. Now how is valuation decided in first place, it varies based on the company. Some can use some multiple of profit, revenue, market size etc.
I don't think there is a straight forward formula that you can use. There are huge divisions in companies that do all that magic to come up with that number.
There’s a few methods you can use to triangulate at that fresh value: discounted cash flow for the next 5-7 years, looking at where similar companies in the industry trade, last price private investors paid etc.
DCF means accounting for future 7 years of earning or revenue ?
It’s not always 7. Typically 5-7 for mature companies, 10 for mid-size and you don’t typically use it for smaller companies that don’t have profits. You discount cash flows which is profits (net income) plus any non-cash charges like depreciation etc.
I can tell that it’s usually anywhere from 8x-12x times the revenue on IPO valuation. LYFT was doing 2.2b, do that’s around 22b.
Today I Learned
Yesterday
1512
White male privilege is real
Tech Industry
Yesterday
2296
Do people underestimate E6 role at meta?
Personal Finance
Yesterday
612
Biden wants to raise capital gains tax to 40%
2024 Presidential Election
Yesterday
779
Trump is a racist, misogynist and overall a scumbag
Tech Industry
2d
8478
What happens when most of your team is Indian?
IMO, It's a guess and what market is willing to pay. Amazon, Google, MS and Apple are close to a trillion, you can work backwards and find a multiplier, but it is really potential of the company and what market is willing to pay. One decent way is to compare with similar companies, for example a company that has similar revenue and growth rate. In other words, as good as bitcoin value.