Question for you re public comps:
I am trying to obtain fully diluted shares outstanding in a straightforward manner utilizing CapIQ. Purpose: for public comps, specifcally market cap and total enterprise value (TEV).
When using the treasury stock method (TSM) for getting options in the $, is it ok to use the weighted average strike price from CIQ? Will this get me to the same result as if I were to try to obtain every options tranche?
Would really appreciate your help, all. Thanks much!
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in general the whole point of spreading your own public comps is so that you arn't relying on capIQ. def best practices to look directly in the filings. (look on bar on the left to find link to SEC filings)
not sure if in every case you will get the same result or not. the most rigorous way to do it is to look at the footnote in the 10-K with the options information and break it out tranche by tranche. Not every firm will reveal all their tranches so they will only have one.
Here's the whole process to get diluted shares outstanding:
1) get most recent share count from front cover of most recent 10-Q or 10-K (or occasionally proxy) 2) get options info from most recent 10K 3) find dilutive effect of options by an IF() statement. If weighted av. strike is less than share price, assume the options will be exercised. if not, then they arnt. Repeat for each tranche 4) multiply options exercised by share price to find proceeds from option exercises 5) divide proceeds by current share price to find share repurchases 6) subtract (4) - (5) to get net dilutive effect of options 7) add (6) + (1) and u have diluted shares outstanding
What about options that are non-vested in-the-money? The definition states that from TSM purpose you need to use all the options that could be exercised and converted into common shares, so from the logical perspective options that are non-vested and in-the-money should be excluded? Any thoughts?
There are arguments both ways, for using either options exercisable or total outstanding. Generally speaking, I've normally used options exercisable, but there are certain cases where you use options oustanding (and ITM), for example, a change in control of the company will often trigger a clause that causes shares to immediately vest.
In reality, it usually won't change the valuation of most companies that much, so just make sure you ask whoever's senior to you and that you're consistent with all your comps.
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