Listed companies as well as new start-ups, often grant share options to their management team and key employees as incentives. These incentives, formally known as Employee Stock Ownership Plan (“ESOP”) or Employee Share Option (“ESO”), have accounting impacts that would affect the profit and loss of the corporates.
To assist managements with overcoming these hassles, Valtech has developed online channels for clients to conduct a preliminary assessment on their potential ESOP. Through the user-friendly interface, users can input some basic parameters (e.g. stock price, vesting period, exercise price of the ESOP, dilution factor and suboptimal factor), from which the model will instantly generate preliminary results. Financial Controller or Chief Financial Officer of a company can immediately gauge the potential profit or loss impact from issuance of such equity linked instruments.
Another extended application is developed for convertible bonds or notes. Convertible bonds (“CBs”) are often issued by corporates as a means of raising capital. Since holders can convert their CBs into company shares when the share price rise above the exercise price, which is a preferential feature to the holders of the CBs, the interest rates offered by the issuers are typically lower than the conventional corporate bonds. As such, CB has become a common financing tool, especially for start-ups with little capital but huge growth potential.
Automated System Supplemented by Human Support
Share options and CBs are both containing derivative components that require advanced financial models to compute their fair values. Managements, while equipping with extensive accounting and finance knowledge, often find it time-consuming to understand the mechanics of those models during their planning stage of ESOP and CB valuation.
Valtech understands that a snapshot result is not sufficient for management to make a holistic decision, in the company’s platform, sensitivity analysis is also provided so users can make a well-informed decision. While users can conduct their preliminary assessment independently, if they are in doubts or need further consultation from the experienced valuation team, they can send instant online message to the company. The consultants will usually reply immediately within office hours.
How to Access?
Clients can enjoy such service by engaging Valtech in typical ESOP / ESO or CB valuation service, then they can enjoy unlimited testing and use of the online tool at pre-issuance stage. Clients can also contact Valtech Valuation team directly for more specific pre-issuance support.
Max Tsang, Director of Valtech Valuation, aims to reshape the firm’s valuation solution service with in-house developed technology. He said, “We have never stopped investing and taking part in developing innovative and practical tech tools to boost our service quality and efficiency. Full automation is still immature while most of our clients still prefer speedy support by finance professionals, I believe our hybrid approach will gain support from new clients. We will continue to inject tech elements to our valuation work.”
Matthew Leung, the responsible person for this innovative project, said, “In our ever-changing business environment, managements often need to make a decision within a tight timeframe. Engaging a professional valuer through traditional channel often takes days if not weeks to perform an initial assessment and those services do not come without costs. Now, with the help of technology, we can provide our clients a more accessible approach to gauge the accounting impact of their corporate actions.”
About Valtech Valuation and Valtech Corporate Services
Established in 2018, Valtech’s combination of technology with valuation has shaped competitive valuation solutions and gained support from over 100 listed companies in Mainland China and Hong Kong. Valtech is powered by a team of valuation veterans and a network of consultants with multidisciplinary specialties, such as qualified valuators and surveyors, quantitative modelers and risk specialists. Our team has a strong track record to provide reliable, responsive and accountable opinions, especially in the complex real-world situation where multiple agenda are being concerned. For most engagements, we promise to arrange at least one CFA charterholder and one CPA holder to ensure that your needs are always well listened and addressed.