LiquiStat consists of records of trades that have taken place between investors in the secondary market.
For each transaction, we have collected information, including deal documents, on the buyers and sellers of the securities, the nature, rights, preferences, and privilleges of the securities, restrictions on resale inherent in the securities, and data on the issuer’s financial condition, among other factors.
The goal is, for each transaction, to discover, determine, and analyze the factors that were considered by the buyer and seller when making the decision to trade. These factors, then, represents the main drivers of value of the securities sold.
LiquiStat contains hundreds of transactions in warrants and options since 2004. These transactions have taken place at discounts from the black-scholes value of the options, due to the illiquidity of the options.
The Black-Scholes option pricing model and other theoretical option valuation models overvalue illiquid warrants and options because these models were never designed to value illiquid securities and do not take into account illiquidity. In fact, perfect liquidity (“continous trading”) is one of the underlying assumptions for the Black-Scholes model.
LiquiStat contains a wealth of information on each transaction and each warrant sold. We use this information to value warrants, but also as a way to determine and support illiquidity discounts for similar illiquid securities, including non-qualified stock options (NQSOs) of public companies. For more detail, see the white paper below: