Equity Value
Investment Banking glossary · Valuation & Implied Share Price Mechanics
Definition
Equity Value = Share Price × Fully Diluted Shares Outstanding. Share price comes from the most recent close (or the ``unaffected'' price before any deal rumor in M&A contexts). FDSO uses point-in-time basic shares from the most recent 10-K/10-Q/8-K plus dilution from options/warrants (Treasury Stock Method), in-the-money convertibles (If-Converted or Net Share Settlement), RSUs (added 1-for-1 with no TSM offset), and mandatory convertibles (always equity). Equity Value is the correct numerator for levered multiples (P/E, P/FCFE).
Equity Value in plain English
Equity Value is simply what all the company's stock is worth: share price times the total number of shares, counting not just today's shares but the extra ones that would appear when things like employee stock options get cashed in (that's what "fully diluted" means). The share price is usually the latest closing price — or, in a takeover, the price BEFORE any deal rumor leaked, so the number isn't already puffed up by gossip. In short, if Enterprise Value is what the whole business costs, Equity Value is the slice that belongs to the shareholders after lenders are accounted for. It's the right number to pair with the P/E ratio, which compares stock value to profit that shareholders actually keep.
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