Valuing Common and Preferred Shares in Venture Capital Financings

28 Pages Posted: 12 Jun 2010 Last revised: 5 Sep 2010

See all articles by Dietmar Leisen

Dietmar Leisen

Johannes Gutenberg University Mainz - Department of Banking

Date Written: September 1, 2010

Abstract

Venture capital financing contracts often use preferred shares which carry preference rights compared to common shares. This paper studies and compares five different methodologies to value common and preferred shares with liquidation rights in a single-period setup of venture capital financing: the so-called venture capital method, discounted cash-flow valuation methods using both the Capital Asset Pricing Model and a Market Model in logs, a risk-preference based approach and finally the real options approach.

Suggested Citation

Leisen, Dietmar P. J., Valuing Common and Preferred Shares in Venture Capital Financings (September 1, 2010). Available at SSRN: https://ssrn.com/abstract=1623829 or http://dx.doi.org/10.2139/ssrn.1623829

Dietmar P. J. Leisen (Contact Author)

Johannes Gutenberg University Mainz - Department of Banking ( email )

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