I am going through technical guides and while I understand the steps behind the treasury stock method I have no idea how it fits into other topics. In the WSO guide it is within merger models section and in BIWS guide it is with Equity/Enterprise Value. How do diluted shares and options fit into those two?
Pretty confused and would greatly appreciate any help.
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When calculating total diluted shares you will need to use the treasury stock method to calculate the total number of shares created from in the money options and warrants. After adding these shares to the outstanding shares you can use the fully diluted share count for numerous things. For merger models it is used to calculate EPS (net income/fully diluted shares) and for enterprise value/equity value it is used to calculate the implicit stock price after a DCF.
DCF Treasury Stock Method - Share price basis for in-the-money stock options of a private company (no M&A) (Originally Posted: 11/26/2017)
What share price will you use as a basis for in-the-money stock options of a private company not undergoing an M&A.
If it's publicly listed, it's market price, if under M&A, offer price. But what if it's neither?
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