Episode Details

We started today’s class by looking at IPOs, and how to incorporate both the proceeds and the pricing considerations of bankers (who guarantee an offering price) as well as how VCs and PEs may look at firms during their transitions. Along the way, we had a discussion of direct listings as a challenge to the IPO process and
http://aswathdamodaran.blogspot.com/2019/10/disrupting-ipo-process-challenging.html
We then started on the real options discussion with an analysis of the two driving forces behind their value: learning and adaptive behavior, and then moved on to the three questions that need to be asked and answered before buying into the real options argument:
1. Is there an option embedded in an asset? (Look at the cash flow payoffs)
2. Does that option have value? (Is there exclusivity?)
3. Can you use an option pricing model to value that option? (Are the underlying asset and option traded)

Start of the class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/pvtco2test.pdf
Slides: http://www.stern.nyu.edu/~adamodar/podcasts/valUGspr21/session23slides.pdf
Post class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session23Etest.pdf
Post class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session23Esoln.pdf

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