The IVSC’s Tangible Assets Board has received feedback that in some markets there is an increasing difference between Price and Value. Whilst quantifying this difference in valuation terms has commonly been acknowledged as difficult in undeveloped markets where there may be few (if any) comparables and non-transparent information, it has also become increasingly challenging in developed markets despite the abundance of information that exists in these ecosystems.
The current coronavirus epidemic has created a significant layer of uncertainty which has permeated all markets and led to various challenges, particularly as it relates to the availability of market information in a pandemic world. This isn’t necessarily just confined to the basis of Market Value but it still raises its own specific challenges. How does the valuer quantify Market Value with a lack of market comparable information in the new COVID-19 world? Where market comparable information is available, have the parties ‘acted knowledgeably, prudently and without compulsion’? Does a pandemic environment enable parties to undertake ‘proper marketing’ or do sales that are witnessed in the early stages of such an event represent an environment comprised of overly willing sellers and opportunistic buyers that is more aligned with a liquidation market?
All of this comes at a time when some organisations around the world are considering a transition away from Market Value because of the difficulties such a basis of value creates during volatile markets.
The IVSC’s Tangible Assets Board has published a paper looking at this subject in more detail. You can download their Perspectives Paper – Challenges to Market Value by clicking here: