Equity value

Equity value is a market-based measure of the value of a firm. It accounts for all the ownership interest in a firm including the value of unexercised stock options and securities convertible to equity. Equity value differs from market capitalization in that it incorporates all equity interests in a firm whereas market capitalization only reflects those common shares currently outstanding.

Calculating Equity Value

For a publicly-traded company, the following represents the basic components of equity value:

Equity Value = 
Market capitalization 
+ Value of in-the-money stock options 
+ Value of equity issued from in-the-money convertible securities 
- Proceeds from the exercise of stock options and/or convertible securities