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Downside Upside Ratio

The document discusses downside upside ratios when considering an acquisition. It states that large caps are typically priced 60-65% below private market value, while small caps are around 75% below. The worst case scenario is 25% of private market value. It then provides an example of calculating the downside upside ratio for a small cap stock priced at $15 with a private market value of $36, finding an upside to target of $13.80 and downside risk of $6, resulting in a ratio of 2.3.

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Lukas Savickas
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29 views1 page

Downside Upside Ratio

The document discusses downside upside ratios when considering an acquisition. It states that large caps are typically priced 60-65% below private market value, while small caps are around 75% below. The worst case scenario is 25% of private market value. It then provides an example of calculating the downside upside ratio for a small cap stock priced at $15 with a private market value of $36, finding an upside to target of $13.80 and downside risk of $6, resulting in a ratio of 2.3.

Uploaded by

Lukas Savickas
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Downside Upside Ratio

Acquisition Price = Private Market Value


Max Price of Public Company is 80% of Private Market Value
Large Caps are priced around 60% 65% below the Private Market Value
Small Caps are priced around 75% below the Private Market Value. Worst
case is 25% of Private Market Value
Higher than 5:1 Ratio

Ex.:
Stock XYZ is a small cap and currently priced at $15
Private Market Value is $36
The sell target is 80% of $36 = $28.80
Worst case Private Market Value is 25% of $36 = $9
Upside to Sell Target: $28.80 - $15 = $13.80
Downside to Worst Case Scenario: $15 - $9 = $6
Ratio: 13.80 / 6 = 2.3

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