How do you calculate market cap & enterprise value?
Example: SciPlay Corporation (SCPL) has
- 24.7 million Class A common shares issued and o/s
- 103.5 million Class B common shares issued and o/s
- stock price is trading at $14.10 (today)
- $7.0 million in debt and $292.0 million in cash for net debt of -$285 million.
- $453.9 million in minority interest
- no preferred equity
Seeking Alpha says: market cap (implied) of $1.79B and enterprise value of $513MM. This market cap includes the Class B shares, but enterprise value excludes Class B shares.
CapIQ says: market cap of $345MM and enterprise value of $514MM. This market cap and enterprise value exclude Class B shares. CapIQ does then note an "Implied Market Capitalization" of $1.79B that includes Class B shares but this is seemingly not the market cap that is used to calculate enterprise value.
If enterprise value = market cap + net debt + minority interest + preferred equity, what market cap and enterprise value is correct when a company's common stock is bifurcated between Class A and Class B?
Thanks!
If I could tack on a question in regards to market cap -
If a company IPOs a minority interest, is the market cap that company is trading under the value of those shares or the value of the whole firm?
ex: Google IPOs 25% of its company, it trades at a market cap of 100m. Is google worth 100m or is it worth 400m?
400M - Market cap is based on total shares outstanding.
You would use both. If both class A and class B are trading at $14.1 I don't know why neither source quotes market cap as 128.2M shares x $14.1 = 1.807B (maybe a timing issue w.r.t the spot value each source was using)
In my experience the difference between A / B shares is typically a function of voting power. All else equal, if Class A has 2x the voting power typically the price will be ~2x that of class B. The fact that both are trading at $14.1 suggests there is no difference in voting power (this can be the case for a number of reasons).
I've found CapIQ to be hit or miss as it scrapes the Ks / Qs, interprets the filings, and then runs it's own calculations. Sometimes these can be close, other times these can be drastically off. In the automated comps we've built that refresh based on CapIQ formulae, we often have to build up to the valuation in piecemeal as opposed to just outright pulling from CapIQ given these discrepancies.
I'm still confused because that doesn't seem correct... All sources are claiming an enterprise value that is the same (there are differences stemming from the date of the stock price used in the market cap):
Thus, their calculations are: market cap (class A shares o/s * stock price) + net debt + minority interest. So why are all sources excluding Class B shares in the market cap value when calculating enterprise value?
My original post was really just answering the Market Cap question. I can't tell you why those sources are pumping out those EVs. My inclination is either 1) the above information you provided may be more nuanced or, more likely 2) all sources are incorrectly only using Class A to calculate market cap and thus their starting point is wrong.
As I said, I've never once taken the EV or Market Cap pre-populated fields from CapIQ or Pitchbook (I never use Pitchbook for public companies). These data sources are not perfect given the amount of nuance in reporting. Welcome to the real world... a bit different than Finance 405 right? :)
The EVs are incorrect. Just add A+B shares to get TSO. Multiply by share px to get market cap. Then add debt and MI and subtract cash to get EV.
Since the MI represents the class B shares, when using implied market cap (that includes the market value of those shares), should we not add MI for the calculation of enterprise value? It appears it would double-count the valuation to include the addback of MI.
For calculation of EV, it seems like we should use the implied market cap per CapIQ rather than the market cap and then add the components (+debt -cash, etc.). Additionally, the TEV/EBITDA ratio that CapIQ spits out is based on its understated calculation of enterprise value (based on market cap not implied). Therefore, for comps analysis, we should likely manually calculate EBITDA multiples where CapIQ calculates an implied market cap.
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