Performance Rights

Hey guys,

I have a question regarding the treatment of performance rights when valuing a company.

I know that with options, unless the exercise price is above the current share price, they are not counted towards diluted equity value. However, how does one treat performance rights?

My first thoughts are that they should not be included, using the same logic as above. An option will not be counted towards diluted equity value if the exercise price is not above the current share price. Since performance rights are contingent upon certain performance parameters, they should not be counted towards diluted equity value, as they are not vested until these parameters are achieved.

Also, excuse my poor knowledge but If I am not mistaken, performance rights are automatically vested upon achieving the performance parameters, where as options can be held onto and exercised when an individual so desires. Therefore, any performance rights would automatically be counted towards the ordinary shares outstanding figure for the end of the financial year anyway, leaving no reason to count performance rights at all towards diluted equity value, unlike options.

I apologise for creating yet another newbie thread in this section. I just started university and keen to learn.

Thank you.