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Updates
To review a summary of Woodward's recent activities, click here.
Recent Publications & Other Activities
Recent publications by Woodward are indicated below:
- Reducing Compensation Expense. . . Valuing Options in Light of SFAS No 123R Co-authored by Tara Stephenson and Helen Bowers of The Woodward Group and Jane Storero, Esq. of Blank Rome, this article defines fair value of stock options and provides ways to lower compensation expense through setting key option terms. Click here to read full text.
- Sharpening Your Negotiating Skills…What Every Company Should Know Before Meeting with A Potential Investor Co-authored by Tara Stephenson of The Woodward Group and Jane Storero, Esq. of Blank Rome, this article addresses issues including antidilution and valuation that impact on a capital raise. Click here to read full text.
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Prefunding ABCs for Companies Seeking Capital...Getting the Corporate House in Order Published in April 2006 by Opportunity World magazine, this article, co-authored by Tara Stephenson of The Woodward Group and Jane Storero, Esq. of Blank Rome, provides useful corporate “clean-up” suggestions, including capital structure re-alignment and other corporate actions that can increase equity value at the next capital raise. Click here to read full text..
- Fairness Opinions-The Value of Independence Learn more about when and if a fairness opinion is required in a transaction and what is meant by "independence"-a fairness opinion rendered by an investment banker paid a contingent fee on the transaction may not pass the "smell" test with respect to independence. Click here to read full text.
- Optionality-A New Measure of Value An emerging discipline, optionality, provides methodologies to value a business and its operations when standard metrics such as comparable analyses do now work, particularly for early stage companies. Click here to read full text.
- Marketability Discounts Click here to read full text. A clear usage guide for when, legally and in practice, marketability discounts are prescribed, a summary of empirical studies on restricted stock marketability discounts and Woodward's work to develop a current market methodology for use in fair market valuation analyses.
Tara Stephenson is serving as a Judge and Planning Committee Member for the 2007 Angel Venture Fair, which she also did in 2005 and 2006.
The Woodward Group is sponsoring a workshop for Expanding Your Horizons at Swarthmore College in March 2007 to provide middle school girls from the Mid-Atlantic states with a greater understanding of practical applications of and careers in finance, economics, science and math.
Technical Notes
- Proposed IRS §409A Regulations
On September 29, 2005, the IRS published proposed regulations regarding the application of §409A to nonqualified deferred compensation plans. Within the body of this document (particularly pages 141 through 143) the IRS outlines criteria to determine the fair market value of stock not readily tradable. This is particularly interesting to Woodward, as many of our clients are privately-held; thinly traded public entities; or actively traded public entities considering recapitalizations involving non-publicly traded subsidiaries or divisions. The proposed regulations state that determining fair market value of stock not readily traded on an established securities market involves the following:
The determination of whether a valuation method is reasonable, or whether an application of a valuation method is reasonable, is made based on the facts and circumstances as of the valuation date. Factors to be considered under a reasonable valuation method include, as applicable, the value of tangible and intangible assets of the corporation, the present value of future cash-flows of the corporation, the market value of stock or equity interests in similar corporations. . . the value of which can be readily determined through objective means. . . and other relevant factors such as control premiums or discounts for lack of marketability and whether the valuation method is used for other purposes that have a material economic effect on the service recipient, its stockholders or creditors. The use of a valuation method is not reasonable if such valuation method does not take into consideration in applying its methodology, all available information material to the value of the corporation.
Woodward consistently applies these criteria and considers other factors, such as creditworthiness, key man insurance values and values implied through historical capital raises. To review the full set of proposed regulations, click here.
Valuable Resources
Woodward's library includes original publications and studies on stock discounts and premia, including the seminal SEC study "Discounts Involved in the Purchases of Common Stock", with data from 1966. We also maintain the MergerStat Review for the previous 10 years, in addition to various industry and valuation specific publications.
Data we find helpful in negotiating transactions and providing analytical services are as follows:
www.ny.frb.org/pihome/statistics/
NY Federal Reserve; useful for obtaining current Treasury, LIBOR, Fed Funds and prime rates when pricing a transaction, in addition to key economic data.
www.bigcharts.com
Provides current and historical share data for publicly traded companies; particularly helpful in negotiating collars and caps for merger consideration consisting of publicly traded stock.
www.freeedgar.com
User-friendly site that provides access to publicly filed SEC documents and permits downloading of financial data directly into an Excel spreadsheet for further analysis.
www.corptech.com
Provides contact and other information on small, privately held technology companies.
www.bea.gov This site, run by the US Bureau of Economic Analysis, provides historical economic data, at times necessary in analyzing the trends of a business or its competitors relative to the overall market.
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