IPO Discount Methodology
When you’re valuing a company at IPO, do you apply the 15% “IPO Discount” 1) to enterprise or equity value 2) to pre or post money valuation?
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It’s on enterprise value. It’s usually post money, but if it’s a secondary IPO it doesn’t matter. When you get the analyst feedback, you make sure they are all post money so you can compare valuation apples to apples.
Usually just slap a 30% discount on the peer EV / EBITDA FY 1 of 2 (or whatever the relevant metric is) and call it a day.
IPO discounts are closer to 25-30% now, it’s not 2021 anymore. Other thing to note when putting in the discount is it’s 1/(1-discount) to get the valuation.
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