How to Find the Share Price of an Unlisted Company
Why Find the Share Price of an Unlisted Company?
Before diving into the specifics, it’s crucial to understand why someone might want to find the share price of an unlisted company. Often, the motivation is driven by investment decisions. Investors might be interested in acquiring a stake in the company, or existing shareholders may want to evaluate the current worth of their shares. Sometimes, competitors or market analysts want to understand how a particular company is performing in the private sector, and the share price can be a proxy for the company’s valuation and growth prospects.
Methods to Estimate the Share Price of Unlisted Companies
1. Financial Statements Analysis
One of the most straightforward ways to estimate the share price of an unlisted company is through its financial statements. These documents provide a wealth of information on the company’s revenues, profits, expenses, and liabilities. A key figure to consider here is the company’s earnings per share (EPS), which can be calculated from net income divided by the total number of outstanding shares. This can serve as a rough proxy for determining a share price. In addition, metrics like Price-to-Earnings (P/E) ratio or Price-to-Book (P/B) ratio can be applied from comparable companies in the same industry to estimate what investors might be willing to pay for shares in the unlisted company.
For example:
| Metric | Unlisted Company A | Listed Competitor B |
|---|---|---|
| Net Income | $5 million | $50 million |
| Outstanding Shares | 1 million | 10 million |
| Earnings Per Share (EPS) | $5 | $5 |
| P/E Ratio | 15x | 15x |
| Estimated Share Price | $75 | $75 |
By applying the same P/E ratio from a listed competitor, you can approximate that shares in Unlisted Company A might also be worth around $75.
2. Private Equity Transactions
Private equity firms, venture capitalists, or angel investors often invest in unlisted companies. When these investments occur, there is usually a valuation of the company as part of the deal. These valuations can offer a glimpse into the company’s share price. By examining recent fundraising rounds or private equity deals, one can estimate the price per share based on the valuation and the number of shares issued.
Let’s say an unlisted company recently raised $10 million at a post-money valuation of $100 million. If there are 10 million outstanding shares, you can deduce that the price per share is $10 ($100 million divided by 10 million shares).
3. Employee Stock Options
Many unlisted companies offer Employee Stock Ownership Plans (ESOPs) or stock options as part of compensation packages. Sometimes, the exercise price of these options is disclosed in company filings or through employee reports. The strike price of stock options, while not necessarily the same as market price, can give an indication of the valuation the company is using for internal purposes. Moreover, if employees are able to sell their vested shares through secondary markets, this can provide additional clues to the company’s share price.
4. Secondary Markets
Although unlisted companies do not trade on public exchanges, shares are often bought and sold on secondary markets such as SharesPost, EquityZen, or Forge Global. These platforms allow employees, early investors, or other shareholders to sell their stakes, offering insights into the price at which transactions are happening. By tracking transactions on these secondary platforms, one can observe trends and fluctuations in the company’s perceived market value. This information is useful, though often limited to companies with enough interest from the market to attract buyers and sellers.
5. Comparable Companies and Industry Multiples
Another method involves comparing the unlisted company to publicly traded peers in the same industry. By analyzing key financial ratios, such as the P/E ratio, P/B ratio, or EV/EBITDA ratio of listed companies, you can derive an estimate for the unlisted company’s share price. Industry multiples give a rough valuation guide, but since unlisted companies often operate at a different scale or growth phase, these comparisons should be made cautiously.
Here’s a breakdown of how this could work:
| Comparable Company | P/E Ratio | Estimated Share Price |
|---|---|---|
| Listed Tech Company A | 25x | $100 |
| Unlisted Tech Company B | 20x | $80 |
If an unlisted tech company has a lower growth rate than a public peer but operates in the same sector, you might apply a smaller P/E ratio (20x compared to 25x) to estimate the share price.
6. Discounted Cash Flow (DCF) Analysis
For those more comfortable with financial modeling, a Discounted Cash Flow (DCF) analysis can also help estimate the value of an unlisted company. This involves forecasting the company’s free cash flow into the future and discounting it back to the present value using a discount rate, typically the company’s weighted average cost of capital (WACC). While this method requires detailed financial data and assumptions about future growth, it can offer a precise estimate of the company’s intrinsic value, which can then be divided by the total number of outstanding shares to estimate the share price.
Here’s a simplified DCF analysis for a hypothetical company:
| Year | Free Cash Flow ($M) | Discount Rate (%) | Present Value ($M) |
|---|---|---|---|
| 2024 | 10 | 10 | 9.09 |
| 2025 | 12 | 10 | 9.92 |
| 2026 | 14 | 10 | 10.57 |
| ... | ... | ... | ... |
The total present value of future cash flows would provide the total company value, and dividing that by the number of shares can give a share price estimate.
The Challenges of Valuing Unlisted Companies
Despite these methods, valuing an unlisted company is often more art than science. Many factors can obscure the process, including limited availability of financial information, the volatility of private markets, and the lack of liquidity in unlisted shares. Moreover, the value of an unlisted company may fluctuate significantly based on investor sentiment, market conditions, and the company’s growth stage.
Unlisted companies are also not subject to the same stringent reporting requirements as publicly listed firms. This lack of transparency can make it difficult for outsiders to obtain accurate or up-to-date financial data, further complicating the process of estimating a share price.
In addition, since unlisted companies do not have the same level of liquidity as public companies, the share price can be subject to greater variability. Shares in unlisted companies are harder to buy and sell, meaning that buyers may demand a discount, or sellers may expect a premium, depending on market conditions.
Final Thoughts
Finding the share price of an unlisted company requires a multi-pronged approach. Whether you're analyzing financial statements, looking at private equity transactions, investigating employee stock options, or using secondary market data, each method provides a different piece of the puzzle. While it is rarely possible to pinpoint an exact share price, these strategies can give you a solid understanding of the company’s value, making it easier to decide whether to invest, sell, or simply stay informed.
In a world where private companies like SpaceX, Stripe, and ByteDance attract significant attention, understanding how to evaluate their share price is becoming more essential for investors and market analysts alike. Even though these companies aren’t listed on a public exchange, their influence on global markets is undeniable.
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