![]() ![]() ![]() One challenge for many business valuation reports is therefore how to effectively communicate the value of a nonmarketable equity interest, particularly the rationale for the selected discount for lack of marketability (DLOM). In other words, liquidity can be conceptualised as impacting pricing and not necessarily intrinsic value. The delta between intrinsic valuation and pricing is, after all, a function of liquidity, not to mention potentially a number of other qualitative and quantitative factors (that in turn help increase or decrease liquidity). Obtaining valuable insight around comparable company transactions is notoriously difficult, but if such information is available, it will be the final transaction price rather than current fundamental value that is reported. ![]() How large should a liquidity discount be for any given company? This is a technical challenge given that the discount itself is not explicit. Indeed, such ‘liquidity discounts’ can reach up to 50 percent of estimated fundamental value. Nonetheless, it is in private markets where liquidity is a key issue in asset valuation and can significantly affect value, or more specifically ‘pricing’. In publicly traded equity markets, liquidity factors may be minimal and simpler, even though they still exist. Determining a private company’s worth and knowing “what drives its value is a prerequisite for deciding on the appropriate price to pay or receive in an acquisition, merger transaction, corporate restructuring, sale of securities, and other taxable events”, according to PrivCo. After all, valuation is a process used to determine what a business is worth. Regardless of whether you are doing valuation based on intrinsic economic value, comparing against how similar assets are priced (multiples) or pricing via real options (contingent claim valuation), illiquidity impacts value, both in terms of cash flow considerations and asset allocation decisions. For example, the promptness of an asset’s conversion into cash – not the certainty of its selling or conversion price. Marketability, on the other hand, is linked to transaction velocity. Sometimes the word ‘liquidity’ is applied to assets that are simply convertible to cash, for example, savings accounts, bank CDs and money market accounts, as opposed to assets that are sold on the secondary market. Liquidity involves both speed of the transaction and visibility around its selling price. Liquidity risk is an aspect of the secondary market. Liquidity and marketability are often confused. Investors value liquidity and would pay more for an asset that is fully liquid than for an otherwise identical asset that is not fully liquid. Liquidity refers to the ease in which an asset can be converted into cash, with cash being fully liquid and other securities liquid, to varying degrees. ![]() Nordstrom is closing all 13 brick-and-mortar locations in Canada, including six in the Greater Toronto Area, located in the Eaton Centre, Sherway Gardens, Yorkdale Centre and Nordstrom Rack locations at One Bloor, Vaughan Mills and Heartland Town Centre.In financial markets, asset liquidity is a key and active consideration. 2014 and two years later Nordstrom opened its first store in Toronto, located at CF Eaton Centre in 2016. The mega-department chain’s first location in Canada opened in Calgary in Sept. All sales will be final with no option to return purchases, according to media reports. Merchandise, furniture, fixtures and equipment are all expected to be available at discounted prices, excluding goods from third parties. The company ceased online sales at the brink of their announcement and final operations at physical locations are anticipated to end in June. READ MORE: Torontonians are wondering what will take over Nordstrom stores after the company announced their closure The Ontario Superior Court of Justice gave the U.S fashion retailer permission to begin liquidating its merchandise at a court hearing at Osgoode Hall on Monday.Ĭourt approval was needed in order for Nordstrom to begin winding down operations under the Companies’ Creditors Arrangement Act. 2, Nordstrom announced they would be closing down shop in Canada to “focus on driving long-term profitable growth” to their U.S. Nordstrom’s liquidation sale begins in the city’s six locations on Tuesday and many Torontonians are ready to empty their wallets for a good bargain. ![]()
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