Warrant valuation is often a simple application of the Black-Scholes-Merton formula with estimating the volatilty the only challenging element of the valuation.
That is not the case when the warrants represent a significant portion of the equity capital structure. This valuation report was prepared for one of those cases.
On August 8, 2017, Issueco entered into a strategic relationship with Partco. As part of the agreement and in exchange for value received Issueco transferred to Partco 18.4 million warrants in two tranches. The first tranche of 9.2 million warrants has an exercise price of $10.75 per share and a term of 4 years. The second tranche of 9.2 million warrants has an exercise price of $12.75 and a term of 6 years. This report illustrates how the warrants should be valued using Monte Carlo simulation.