Introduction
Valuations are a key aspect of managing your company's equity and share plans. They help determine the value of your company, set strike prices for stock options, and ensure compliance with regulatory requirements. In Ledgy, you can manage various types of valuations, each serving a specific purpose depending on your location and needs. This guide provides an overview of the different valuation types and detailed instructions on how to add them to your account. Understanding these valuations will help you accurately represent your cap table and meet your legal obligations.
What is a valuation
A valuation is a process of determining the current (or projected) value of the company or its assets. Depending on the country you are based in, you might need to use different valuations to specify the strike price of your options, option expensing features, or similar. Your local authorities or independent appraisers give valuations and can be stored in Ledgy.
Valuation types
Company valuation
Company valuation is used to show stakeholders the value of their investment and changes after each financing round. The valuation applies across all share classes and changes the representation of your cap table accordingly. Suppose you are allowed to share valuation with your stakeholders. In that case, company valuation will change the current value of the grants your employees own, as well as the value of your company for your investors.
To add a Company valuation:
Go to Ownership > Transactions, then click Add transaction
Under Other, select Valuation to open the "Valuation" window
Company valuation will be automatically selected in the Valuation type dropdown
Create inputs with the valuation data:
Valuation date
Valuation event name - for example, Series A
Company share price
Optional: add documents, internal note and any custom field data you require
Click Save
Publishing changes will adjust your cap table and share the data with your stakeholders
Adding custom Company valuations per share class
If you have share classes that have a different price per share, you can reflect this by clicking the 'Custom valuation per share class' toggle.
This will allow you to add multiple share prices for as many share classes as you like. To add subsequent valuations, click on the + Add valuation button.
Note that all remaining share classes will have the valuation shown under the 'All remaining share classes row'.
How Ledgy calculates the post-money valuation
The post-money valuation shown on your cap table and dashboard is calculated from your latest Company valuation:
Post-money valuation = Fully diluted shares × Share price of the latest Company valuation
Example: 1,000,000 fully diluted shares × CHF 2.50 = CHF 2,500,000
Good to know:
Only Company valuations are used. 409A, Fair value, EMI and CSOP/Unapproved valuations do not change the post-money valuation.
Custom valuations per share class: Ledgy multiplies the fully diluted shares of each class by that class's price and adds the results together. Classes without their own price use the 'All remaining share classes' price.
Different nominal share prices: the price is adjusted per class: Fully diluted share capital × Share price ÷ Nominal share price.
Excluded pools: pools excluded from the cap table do not count towards the valuation (see How to exclude pools from the cap table?).
The valuation updates automatically when fully diluted shares change (e.g. new issuances or grants), even without a new valuation transaction.
Hover over the info icon next to Post-money valuation on the cap table to see the exact calculation for your company.
Note: The pre- and post-money valuation in Scenarios (deprecated feature) is entered directly for each modelled round and is separate from the cap table valuation.
409A valuation (US)
A 409A valuation is an assessment of the fair market value of a private company's common stock by an independent appraiser. It is not shown to your stakeholders explicitly but used to determine the lowest strike price. The lower boundary of the strike price is defined as the fair market value. If options are exercised below that price, the company, along with the employee, might be subject to tax penalties. 409A valuations are valid for one year unless a material event occurs (such as a financing round).
To add a 409A valuation:
Go to Ownership > Transactions, then click Add transaction
Under Other, select Valuation to open the "Valuation" window
Choose 409A from the Valuation type dropdown
Create inputs with the valuation data:
Valuation date
Price per share
Optional: add documents and internal note
Click Save
Note: Documents associated with the 409A valuation can be found in the Data room > Pools > Valuations folder.
Fair value
A fair value, defined by IFRS 2 Appendix A, is the amount for which an equity instrument can be exchanged or transferred between parties. The values given by this valuation are not shared with your stakeholders but are only used to create Option Expensing (or Share-Based Payments) reports.
To add a Fair value valuation:
Go to Ownership > Transactions, then click Add transaction
Under Other, select Valuation to open the "Valuation" window
Choose Fair value from the Valuation type dropdown
Create inputs with the valuation data:
Valuation date
Price per share (spot price)
Volatility
Risk-free rate
Optional: add documents and internal note
Click Save
Now the Option Expensing will use this fair value to calculate the option values
Note: Documents associated with the fair value valuation can be found in the Data room > Pools > Valuations folder.
EMI valuation (UK)
EMI (Enterprise Management Incentive) valuation is not shown to your stakeholders explicitly but used to determine the lowest strike price of the EMI grants. The valuation needs to be requested from the HMRC through the VAL231 form. The lower boundary of the strike price is defined as the actual market value (AMV) of the valuation. EMI options need to be granted before the expiry date of the valuation, which is specified on the valuation documentation (most commonly 90 days).
To learn more about EMI limitations and workflows, check the help article on Grant types.
To add an EMI valuation:
Go to Ownership > Transactions, then click Add transaction
Under Other, select Valuation to open the "Valuation" window
Choose EMI valuation from the Valuation type dropdown
Create inputs with data received from the HMRC:
Valuation date
AMV (Actual Market Value) price per share
UMV (Unrestricted Market Value) price per share
Valuation expiry date
Optional: add HMRC Reference, documents and internal note
Click Save
Publishing changes will adjust your scheme limitations accordingly
Note: Documents associated with the EMI valuation can be found in the Data room > Pools > Valuations folder.
CSOP & Unapproved valuation (UK)
CSOP (Company Share Option Plan) & Unapproved valuations are not shown to your stakeholders explicitly but are used to determine the lowest strike price of the CSOP grants. For CSOP the valuation needs to be requested from the SAV team of the HMRC. The lower boundary of the strike price is defined as the unrestricted market value (UMV) of the valuation. CSOP options need to be granted before the expiry date of the valuation, which is specified on the valuation documentation (most commonly 60 days).
To learn more about CSOP limitations and workflows, check the help article on Grant types.
To add a CSOP or Unapproved valuation:
On the Ownership > Transactions, click "Add transaction" button
Selecting Valuation will open the "Valuation" window
Choose CSOP/Unapproved (UK) valuation from the Valuation type dropdown
Create inputs with data received from the SAV team:
Valuation date
AMV (Actual Market Value) price per share
UMV (Unrestricted Market Value) price per share
Valuation expiry date
Optional: add HMRC Reference, documents and internal note
Click Save
Publishing changes will adjust your scheme limitations accordingly
Note: Documents associated with the CSOP valuation can be found in the Data room > Pools > Valuations folder.