Granting share options or share awards creates an accounting charge even though no cash leaves the business. Under HKFRS 2 Share-based Payment, the expense is measured at the fair value of what was granted – and for an unlisted company, none of the inputs can simply be read off a screen. Valtech Valuation provides independent share option and ESOP valuation in Hong Kong for options, restricted share units (RSUs), share awards and warrants, evidenced for audit.
How HKFRS 2 Measures Share-Based Payments
For equity-settled awards, fair value is measured at grant date and recognised over the vesting period. For cash-settled awards, including phantom share schemes, fair value is remeasured at every reporting date until settlement. Modifications, cancellations and repricings trigger further measurements.
Awards We Value
- Employee share options and warrants, including tranches with different exercise prices
- RSUs and share awards, including awards that sit below several classes of preferred shares
- Performance-based and market-condition awards (TSR targets, share-price hurdles)
- Options granted by unlisted and pre-IPO companies
- Cash-settled and phantom share schemes
- Repricings, modifications and cancellations
Choosing the Right Option Pricing Model
- Black-Scholes-Merton – simple European-style options with a fixed term and no performance condition.
- Binomial or trinomial lattice – American-style options, graded vesting, early-exercise behaviour or terms that change over time.
- Monte Carlo simulation – market conditions and path-dependent payoffs that a closed-form model cannot capture.
Using Black-Scholes for an award with a market-based performance condition is a common audit finding. We match the model to the actual terms of your plan.
The Inputs Auditors Test Hardest
- Underlying share price – for unlisted companies, established through an equity valuation (often a backsolve from the latest funding round) and allocation across share classes.
- Expected volatility – from a justified peer group of listed comparables, measured over a window matched to the expected life.
- Expected life – reflecting vesting structure and expected exercise behaviour, not just the contractual term.
- Risk-free rate – Hong Kong Exchange Fund Note or equivalent government yields matched to the expected life.
- Dividend yield and forfeiture – expected over the life of the award and trued up to actual outcomes.
Each grant date is a separate valuation. A company that granted awards on four dates needs four point-in-time analyses. Let us know how many grant dates are involved when you enquire – it is the main driver of scope and fee.
Frequently Asked Questions
Our company is not listed. How do you get a share price?
We value the equity first – usually by backsolving from a recent priced round, or with income and market approaches – and then allocate it through the liquidation waterfall to arrive at the ordinary share value.
We repriced options after a down round. What happens?
A repricing is a modification. The award is valued immediately before and after the change, and the incremental fair value is recognised in addition to the original charge.
Can you value grants from prior years that were never recognised?
Yes. This is common before a first audit or an IPO. Each historical grant is valued as at its own grant date using information available at that time.
Why Hong Kong Companies Choose Valtech
Share-based payment valuations are reviewed by auditors, and for pre-IPO companies by sponsors, reporting accountants and international investors. The credibility of the team behind the numbers matters.
- A strong team with outstanding international credentials – our directors hold CPA, CFA, FRM, MRICS, ABV (AICPA) and China Certified Public Valuer qualifications gained in Hong Kong, the United States, the United Kingdom and Mainland China. When your valuation is reviewed by authorities, auditors and international stakeholders, recognised credentials give it immediate standing.
- Senior members closely monitor every valuation – a director is personally involved in each engagement and signs the report. Your concerns are addressed directly by an experienced professional who knows your plan and your cap table.
- Quantitative capability in-house – binomial trees, Monte Carlo simulation and option pricing models are built and run by our own team.
- ISO 9001 certified quality management – defined review steps before any report is released, and auditor queries handled within the engagement.
- Proven track record – more than 1,000 valuations and 18 years serving Hong Kong companies, from startups to listed groups.
Request a Share Option Valuation Quotation
Send us the plan rules, the grant dates and your reporting date. A director-level valuer in Hong Kong will reply with scope, fee and turnaround. Call +852 2388 9262 or email admin@valtech-valuation.com.
More detail: Share option & ESOP valuation – Valtech Hong Kong
Valtech Valuation Advisory Ltd, Unit 2106, 21/F, Futura Plaza, 111-113 How Ming Street, Kwun Tong, Kowloon, Hong Kong. This article is general information, not valuation, accounting, tax or legal advice for any specific entity.