Schmidt Associates professionals are actively engaged in increasing our understanding of valuation methodologies, public policy proposals, and to untangle and measure complex damages. While much of our research is proprietary, our experts contribute to the professional literature and debate. Below are some of our recent studies, articles, and working papers, as well as links to helpful resources.
Articles/Documents
New Tools for Valuing Private Company Interests in Family Law Matters
Forthcoming, Family Law News, Family Law Section, California Bar Association, July 2010
Bruce Pollock and Ronald Schmidt
Recent advances in business valuation techniques for tax purposes have direct implications for valuing private company interests in divorce cases. When one partner has stock options in a privately held company, we discuss how new valuations required by IRS Section 409(A) provide information that can help improve the valuation of those interests.
Avoiding Distortions when Using an OPM to Allocate Value: Selecting the "Option" Term
Forthcoming, Business Valuation Update, May 2010
Bruce Pollock and Ronald Schmidt
In this study, we discuss how current practices using option pricing models to allocate value can attribute too much value to common stock by failing to include future dilution. One way to avoid this bias is to use a shorter option term that only covers the period until the next financing round.
Fiscal and Economic Implications of Internet Poker in California
A study on behalf of Poker Voters of America, presented to the California Senate Committee on Governmental Organization, February 2010
José Alberro and Ronald Schmidt
It is estimated that California residents wagered over $10 billion in Internet poker on offshore sites. Our analysis considers the fiscal and economic impact of redirecting that revenue to regulated legal sites in California. We find that legalization of Internet poker in California could raise over $2.7 billion in state revenues between 2010 and 2016 and generate modest gains in employment.
One Solution to the Option Pricing Overvaluation Problem: Using Down and Out Call Options
Business Valuation Update, May 2011
Ronald Schmidt and Lawrence Schmidt
Valuation of early-stage privately held companies for tax and accounting purposes has put increasing emphasis on option pricing models to “backsolve” implied enterprise values from recent equity rounds. This methodology typically yields much higher values for common stock, raising questions about its reliability. In this article, we demonstrate how the use of exotic option pricing models, instead of standard Black-Scholes models, corrects for some of the upward bias implicit in Black-Scholes by considering path dependence.