When a buyer pays more than a company’s quoted share price, the difference is often described as a “control premium”. However, this premium can reflect two distinct sources of value: acquiring control of the business and capturing benefits from combining it with another business. Understanding the distinction is essential to applying valuation adjustments correctly. The first

A discount for lack of marketability (DLOM) reflects the reduced value attributable to an investor’s inability to readily convert an investment into cash. In simple terms, an investor will generally prefer an investment that can be sold quickly, at a transparent market price and with limited transaction costs, over an otherwise similar investment for which there

A business valuation does not necessarily end once the enterprise value or equity value has been calculated. The next question is equally important: what exactly is being valued? A controlling interest and a minority interest in the same company can have materially different values. A minority discount is generally applied after arriving at the equity value

A valuation is not simply a calculation. It is a reasoned conclusion that must ultimately face a practical test: what value would be agreed between a willing and informed buyer and a willing and informed seller in a negotiated environment? This test is not always easy to apply. Many valuations are prepared for regulatory, tax, accounting,

There are situations where the value placed on a business appears to be substantially removed from its intrinsic value. SpaceX may be a useful case in point, not because the business lacks quality or ambition, but because the investment case seems to depend heavily on what the business may become, rather than what it is currently

In a recent article, I discussed how market prices can sometimes drift away from fundamental value. Public markets are influenced by sentiment, scarcity, future expectations, competitive bidding, and liquidity. As a result, the price paid for a share is not always a direct reflection of the underlying economics of the business. Interestingly, the opposite challenge often

In an earlier discussion on the valuation of SpaceX, I explored the tension between traditional fundamentals and pricing driven by momentum, scarcity, or investor sentiment. The central question was simple: if an asset generates little or no cash return today, what exactly are investors paying for? One answer is that investors are not always buying cash

Every time a company achieves a valuation that appears disconnected from its current financial performance, the same debate emerges: has the market become irrational? Traditional valuation methodologies are built on a simple premise. Value is derived from expected future cash flows, adjusted for growth prospects and risk. When valuations move far beyond what these models suggest,

The traditional technology company journey used to be fairly predictable: build a product, raise venture capital, scale rapidly, go public, and let public market investors participate in the next phase of growth. SpaceX challenges that model. But the point of this discussion is not whether SpaceX is correctly valued, overvalued or undervalued. That is a separate

South Africa’s recent sovereign credit rating development is more than a headline for economists. Strictly speaking, Moody’s did not upgrade the rating itself last week; it affirmed South Africa at Ba2 and changed the outlook from stable to positive, citing improving fiscal performance, reform momentum, rising primary surpluses and expectations that debt pressures will ease. But