I was looking through an investment memo byfor the private equity market. In the secondary market, secondary's were trading at around 85%-90% NAV.
I'm not too familiar with private equity calculations and was hoping someone could clarify how NAV is calculated for private companies. Since prices aren't marked to market the NAV calculation doesn't seem quite as simple for private companies. Here's what I was able to find online but am not entirely confident. Let me know if this is correct or not.
NAV = (Assets - Liabilities)/Outstanding Shares
Since there's less liquidity in PE, we would have to make assumptions about the assets in the investment.
1.) We would use comps,, 's, etc. to find the value of the investment at each point in time.
2.) We would then find the. Enterprise Value - Debt + Cash = Equity Value.
3.) Equity Value / Outstanding Shares
Does this seem to be correct or was my information wrong? Not too much online for PE calculations just open end fund calculations. Thanks for your help.