Updates

A publicly traded Woodward client inadvertently created a perpetual option as part of a privately placed convertible debt issuance.  A third party fair value of the option was then required to allocate debt proceeds between primary debt and equity for the Company’s audited financial statements, per APB No. 14.  Perpetual options are rare and usually theoretical, for example, Barron’s argued that Lehman Brothers’ stock was essentially a perpetual option as of September 2008.  Woodward successfully valued the perpetual option, communicated with the Company’s auditors and created auditable worksheets, calculations and a report in less than one week—allowing the Company to file its 10-Q on time.  Click here for more information on perpetual options.  

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Recent Publications & Other Activities
Recent publications by Woodward are indicated below:

  • The Executive Compensation Dilemma:  What Should the Board and Compensation Committee be Doing?  Co-authored by Tara Stephenson of the Woodward Group, this article addresses valuation issues in executive compensation.  Click here to read the full text.
  • Reducing Compensation Expense. . . Valuing Options in Light of SFAS No 123R.  Co-authored by Tara Stephenson and Helen Bowers of the Woodward Group, 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.
  • Valuing a Business Prior to a Capital Raise... What is Your Business Really Worth?  Co-authored by Tara Stephenson of the Woodward Group, this article addresses issues including antidilution and valuation that impact on a capital raise.  Click here to view the first page of this article.
  • Prefunding ABCs for Companies Seeking Capital...Getting the Corporate House in Order.  Co-authored by Tara Stephenson of the Woodward Groupthis article, provides useful corporate 'clean up' suggestions, including capital structure re-alignment and other actions that can increase equity value at the next capital raise. Click here to read full text.
  • Fairness Opinions-The Value of Independence.  A white paper authored by Helen Bowers and Tara Stephenson of the Woodward Grpu provides insights on 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.

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.