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MICK RUSE discusses market value and information standards when valuing minority holdings of unquoted shares
KEY POINTS
- No two valuations are exactly the same.
- Management accounts may be required in some valuation cases.
- It may be unwise to place much reliability on forecast profits.
- Would statutory regulation help with information standards?
After 'What price earnings ratio should be used?' and 'what is the discount from net assets?' the next most commonly asked question about the mechanics of fiscal share valuation is 'what information is relevant?' on which this article sets out to shed a little light.
The historical position
Thirty or more years ago the market value of unquoted shares was determined through the application of a set of fairly well defined rules. A dividend yield approach often produced a low value even if earnings were strong and underlying net assets were high.
The importance of dividend yield did carry with it...
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