Session 20: Private Company Valuation

Aswath Damodaran
Aswath Damodaran
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Published 2021-04-14
In this session, we talked about the challenges of valuing private company, especially when the buyer is undiversified and cares about liquidity. We argued that you need to adjust for the lack of diversification in your discount rate (using a total beta). If you are interested, I do have total betas, by sector, on my website and you can find the data here:
www.stern.nyu.edu/~adamodar/pc/datasets/totalbeta.…
We also talked about dealing with the lack of liquidity with an illiquidity discount, which should vary across companies, buyers and time. We also showed why the value to a private buyer will be lower than to a public buyer, and that this can lead to shifts in ownership of assets over time. I am also attaching the weekly challenges (two, but very simple) for the week.
Start of the class test: www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/pvtcot…
Slides: www.stern.nyu.edu/~adamodar/podcasts/valspr21/sess…
Post class test: www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postcl…
Post class test solution: www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postcl…
All Comments (5)
  • @sarathnair6836
    Professor, your knowledge is so vast, and you do bring up all the right issues! Thank you for sharing..
  • @harishsai2852
    Professor, with all due respect, you are a badass! 🥂
  • @MyDreamside
    professor wouldnt be surprised if Musk went to rehab. lol