The Financial Reporting Blog

A weekly update on financial reporting topics curated by Mercer Capital’s Financial Reporting Valuation professionals.


The Valuation Implications of Filing (or Not) a Patent

Applications for patents in the U.S. have nearly tripled over the past 20 years. Perhaps increased innovation, more cutthroat competitive practices, and an uptick in litigious activity surrounding idea ownership are to credit. One thing that is clear is that there are many implications of filing a patent beyond just its ability to enforce exclusivity of an idea – for founders and investors alike.

EBITDA and Credit Stretching

EBITDA as a universal measure of unlevered earnings may get more play than is warranted because CapEx requirements can vary widely among firms even within the same industry. Nevertheless, EBITDA is the baseline profitability measure for lenders and equity investors across many if not most industries other than financials. Creditflux held a panel discussion titled “Getting EBITDA right.” My more descriptive title after listening to the panel’s comments would be along the lines of: “Is adjusted EBITDA a hoax?”

Is an Initial Coin Offering a New Way to Raise Money?

What to do when an IPO requires too much legal work and is subject to regulation and finding a venture capital partner takes too long and is full of unknowns? Mint your own money, of course. In this case, however, companies are minting digital coins rather than churning out physical objects.

Consequences of Complex Capital Structures – A Coda or a Bridge?

From our perspective, contractual (and/or customary) rights and preferences allocated among the various parties to a transaction define the parameters within which we operate while measuring fair value. That being said, the extent to which differential shareholder rights can or cannot be (legally or normatively) enforced may inform the assumptions and expectations of market participants, be they VC investors or startup employees. And those market participant perspectives will inform the valuation analysts’ assumptions and methods.

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