I don't understand how this model can be applied to private companies. It seems to require a cap table, which isn't publicly available until after the company goes public. I understand that in the example given (Square), the analysis calculates the fair market value at the time of their Series E, but it was performed after they went public, with the benefit of the cap table. Can this actually be used by the public in place of a funding valuation?
I agree there are flaws in using that number as a representation of a company's value, and to be clear: I'm not arguing that Uber's $69B valuation is not inflated. I'm arguing that it's inaccurate to report Uber was worth $69B at their last round, and now that SoftBank intends to buy common stock at $48B, Uber are valued at $48B (or some dramatically reduced value in-between). I'm arguing that because SoftBank is not offering $X/share to Uber in exchange for newly issued shares, as is the case in a funding round. This is a transfer of ownership between existing shareholders, and if they can strike a deal in this secondary market then so be it. It doesn't affect Uber in the way a funding round does: they've allowed the deal to go down, but they a) receive none of the money changing hands (that goes to the shareholders who are selling), and b) take no dilution. So it's unfair to say that this sale price is indicative of the company's valuation in the same way a new funding round would be - they are entirely different beasts.
I don't understand how this model can be applied to private companies. It seems to require a cap table, which isn't publicly available until after the company goes public. I understand that in the example given (Square), the analysis calculates the fair market value at the time of their Series E, but it was performed after they went public, with the benefit of the cap table. Can this actually be used by the public in place of a funding valuation?
I agree there are flaws in using that number as a representation of a company's value, and to be clear: I'm not arguing that Uber's $69B valuation is not inflated. I'm arguing that it's inaccurate to report Uber was worth $69B at their last round, and now that SoftBank intends to buy common stock at $48B, Uber are valued at $48B (or some dramatically reduced value in-between). I'm arguing that because SoftBank is not offering $X/share to Uber in exchange for newly issued shares, as is the case in a funding round. This is a transfer of ownership between existing shareholders, and if they can strike a deal in this secondary market then so be it. It doesn't affect Uber in the way a funding round does: they've allowed the deal to go down, but they a) receive none of the money changing hands (that goes to the shareholders who are selling), and b) take no dilution. So it's unfair to say that this sale price is indicative of the company's valuation in the same way a new funding round would be - they are entirely different beasts.