Complex valuations
23Sep 2013

Complexity of Equity Warrants Valuations

Complexity of Equity Warrants ValuationsComplexity of Equity Warrants Valuations. If you have recently been offered a warrant as a perk from a company you work for, it may be a good idea to use a certified

If you have recently been offered a warrant as a perk from a company you work for, it may be a good idea to use a certified valuation service to determine what you should do with the warrant as well as when you should complete it. Though the Black Scholes options pricing method can offer you a basic understanding of the potential value of the warrant, a certified valuation service will have a full understanding of some of the details of a warrant as listed below.

Warrants are often offered by companies in order to “sweeten the deal”. The idea of a warranty is to offer stock at a predetermined price for a predetermined amount of time which can range from 2 years to the end of time.

The only time a valuation of a warrant is simple is when the open market offers the stock at a lower price than that of the one offered on the warrant. Even then a valuation is needed in order to determine if the stock is worth the purchase price, but at least you know what the warrant is not worth. In every other case the valuation is complex and can even depend on which type of warrant you have. There are detachable warrants, wedded warrants, covered warrants, and naked warrants.

Generally the longer you have a warrant, the less it is worth, so part of the valuation process depends on the time of expiration. The lack of dividends given to warrant holders, interest rates, dilution, premiums, gearing, and implied volatility all influence the valuation. A certified valuation will also consider how the use of a warrant will have an impact on the value of the stock because the use of a warrant will impact the amount of shares, which will in turn impact the value of the stock.

A certified valuation service can take the pressure and worry from learning formulas and valuation models. They return comprehensive reports with specific values for all forms of warrants within your company.


Dale S. Richards specializes in management, marketing, operation optimization & business valuation consulting and is a 20+ year turnaround expert.  He has implemented success concepts into results in 150+ companies. Dale is a Certified Valuation Analyst (CVA) with NACVA and is a Vistage International CEO-Board Chair in Utah AND a Vistage International Speaker on Business Valuation and Optimization for Higher Value. 

Valuation link  

Excel Management Systems


Leave a Reply

Your email address will not be published. Required fields are marked *

20 − 18 =