Growth in Offshore Wind Parks
Government incentives used to support renewable energy growth are essential for a sustainable future. Solar, wind, and hydro are among the most green energy sources. Hundreds of civilizations across centuries have proven the effectiveness of natural energy sources. Wind is a versatile renewable energy that has recently gained tremendous popularity for offshore applications.
Offshore Wind Parks
Climate change impacts virtually every community through extreme weather conditions like severe drought or flooding. Diverse groups of leaders from the political, environmental, and corporate realms have pooled resources to find viable long-term solutions. International think tanks have been researching and developing solutions for decades, and a few have resulted in commonplace changes and modified consumer behavior.
Offshore wind farm projects are cropping up in oceans and seas everywhere from Ireland to Taiwan. Multinational German-based utility companies RWE and BASF Chemicals have teamed up for a major investment to be completed within the next ten years. Potential areas for a wind farm complex in the North Sea are currently being scouted, even as the mega-deal is being composed.
Sharing Responsibility and Revenue
As the single largest energy consumer in Germany, BASF is promoting a commitment to renewable energy and responsible sourcing efforts. The chemical company has committed to owning and maintaining a 49% share of the new offshore wind park. While a large majority, nearly 80%, of the energy produced would be diverted to Ludwigshafen, the balance will be dedicated to powering a 300-megawatt electrolyzer, which will produce green hydrogen.
Replacing the energy consumption share to the surrounding communities will create stability in both the availability and pricing of electric power throughout Germany. BASF and RWE may have created what appears to be an unlikely union, but the potential for long-term benefits far outweighs the current risk. In the meantime, several major investors have expressed interest in this upcoming project.
Valuation of Growth Potential
The current union between BASF and RWE poses nearly five billion dollars under assets through completion. Although the magnitude of this project is much greater than average, the general process of evaluating the true cost and potential is similar to other renewable energy projects.
Understanding renewable energy valuations such as offshore wind parks is important. Investors and owners alike have a responsibility to fully review and evaluate their portion of a new undertaking. Investors should be well aware of the potential value throughout the lease term of a wind energy project.
Investing, buying, or selling a wind park or other renewable energy project requires a thorough review of both the upfront costs and residual value. Clean energy projects are on the rise, and so are the number of available investment strategies. Although the potential earnings are great, so is the possible risk of loss due to undervalued sales or overvalued purchases.
Appraisal Economics uses several reliable methods to value large renewable energy projects, including offshore wind parks. Our industry experts can accurately project potential earnings related to any renewable energy project. If you would like to speak to a member of our team, please contact us today.
Since taking office, President Biden has made a few stands that surprised the American public. Most recently, he announced a fairly substantial new initiative for the Internal Revenue Service. Along with directional change and increased number of staff comes a hefty boost to the IRS’ operating budget. One of the main directives is to increase audits conducted on corporations and the wealthy.
New Budget Guidelines
The $80 billion overhaul was essentially created for the sole purpose of building new ways to manage tax regulations. A popular theory is that increasing the chance of an audit will effectively curb various forms of tax fraud. Most notably, tax evasion as it relates to corporations, organizations, and wealthy individuals or families.
As one of the largest budget increases in IRS history, this effort comes with a very lofty goal. Biden and his cabinet determined that this is money well spent. This one-time budget boost is anticipated to generate up to $700 billion in revenue for the IRS over the next ten years.
Select and Random Audits to Multiply
This substantial staff growth comes on the heels of decades of decreased staffing due to consistent budget cuts. The Biden administration seeks to reverse the effects of limited staffing in many federal programs and departments. The first staffing initiative within the IRS is expected to focus heavily on taxpayer oversight with specific impact.
Inheritance tax breaks allow individuals to transfer up to $11 million ($23 million for couples) to the next generation without incurring tax liability. According to some IRS calculations, there is a severe underreporting of wealth transfer. Families who wish to circumvent the nearly 50% tax rate for inheritance planning may undervalue their assets in an attempt to avoid paying taxes. Bolstered audits will likely uncover millions in potential tax revenue for the IRS within the first year.
Supplemental staffing is not meant to raise the alarm, and there is more involved than simply a lingering audit threat. In addition to increased oversight, the funding hike will also offer benefits to most taxpayers. A higher number of staff and improved online services will make it easier and more convenient for users to connect with live agents or find answers to frequently asked questions.
Qualified Wealth Valuation
To determine the true value of transferred assets, the IRS is now calling on some of the same agencies used by corporations and wealthy families. Expert valuation services like Appraisal Economics offer a complete and unbiased look at past transactions, as well as current assets. Anyone who has a concern about the possibility of misrepresentation of their earnings or tax liability should consider an independent valuation from a qualified firm.
Since the IRS is reaching out to valuation firms to reappraise asset values computed by taxpayers, individuals and corporations should consider obtaining a qualified appraisal report. Advanced preparation brings clarity and may help avoid the unpleasantries of an unfavorable review by the IRS.
Traditionally, sports franchise opportunities extended only to professional teams. As new faces came along and draft picks became regularly televised events, the landscape began to change. Today, college athletes are gaining more recognition than ever before. National media coverage and live streaming events have skyrocketed the hometown hero into the realm of major commercial endorsements.
College Athletics and Notoriety
Student athletes have unique rules placed on them based on the college or university they attend, as well as their sports agent or representative. A current trend has emerged with great opportunities for college athletes to monetize their name, image, and likeness. This evolution comes with elaborate debate and seemingly loose rules.
Streams of Income for Collegiate Sports
Without NIL rights, college athletes are not generally entitled to revenue based on their ability, experience, or personal image. Division Councils, individual states, and key stakeholders have been in discussion to determine who can make money through name, image, and likeness, and through which avenues funds can be routed.
The Supreme Court heard oral arguments in late March and the decision set an influential precedent for future cases resembling the Alston v. NCAA antitrust case. Future laws will be heavily influenced by this landmark case as well. The gap between amateur and professional sports is slowly closing, and the real question of NIL rights often comes down to perceived potential.
Since NIL usage as a source of potential income is a new concept and, despite much discussion, no leading groups have been able to develop a sound formula or create an expected average earnings prediction. Professional football and baseball associations generally garner around $120 million annual revenue through combined licensing deals.
Sports merchandise and promotional apparel items are the largest grossing portion of annual revenue among professional players and associations. College athletes will probably not see that level of revenue anytime soon, but there are several ways in which they can monetize their name, image, and likeness.
Major manufacturers are already vying for marketing efforts utilizing the most popular college athletes. In addition to apparel and promotional items, college sports enthusiasts are willing to invest in other products and services. Video game development, live stream events, and personal appearances all have great revenue potential for young amateur players.
A bigger debate will be forthcoming as colleges and universities hash out how and when the school name, mascot, and other identifiable information can be used. Inevitable changes have savvy collectors taking advantage of early selections as prices of branded merchandise will likely increase as laws change.
What Is It All Worth?
Monetizing the name, image, and likeness of any public figure is a delicate art. Only an expert can offer accurate independent valuation figures. At Appraisal Economics, we perform a wide variety of services, which include calculating NIL for wealthy and famous individuals. With more than three decades of relevant industry experience, our expert appraisers have the keen ability to cover all bases and ensure a complete and accurate valuation report.
Life science and healthcare business movement has more than doubled compared to this same time last year. In fact, the first quarter of 2021 produced more healthcare merger and acquisition activity than any other quarter in history. While several catalysts have prompted this perfect storm in healthcare competition, the resulting changes will impact the future of global healthcare.
Volume and Trends
Positive trends are pointing toward a swift and clear economic recovery. In March 2021, analysts pointed to nearly 300 industry deals. This number, largely made up of acquisitions and mergers, represents the highest total in a single month. The unsurpassed opportunities and recognized revenue have encouraged new investors to enter the healthcare industry in search of the next lucrative deal.
Life science and pharmaceutical, physician services, and healthcare technology were the top three sectors for Q1 activity. Medical device and supply distribution and behavioral health services also appeared in the top grossing healthcare sectors in early 2021.
In a recent press release, Jazz Pharmaceuticals PLC announced their acquisition of GW Pharmaceuticals PLC, a deal valued at around $7.27 billion. These statistics are not surprising, considering the rapid changes in both healthcare and technology due to the pandemic.
Rise of Telehealth Services
The most noticeable and complex healthcare activity comes in the form of telehealth services. Due to the COVID-19 virus, physicians had to quickly pivot and embrace viable new ways to serve their patients. The resulting explosion in telehealth services created new and varied investment opportunities. Physicians were able to offer flexible hours, service features, and more payment options. Patients were ensured safe and comprehensive care with no loss of vital services or prescription coverage.
Walmart has made an unexpected play to get ahead of Amazon in the telehealth arena by acquiring MeMD. The strategic investment in omnichannel healthcare will catapult the retail giant into a new field of service. While Amazon Care will develop their niche in the telehealth industry with a focus on uninsured individuals, Walmart will likely take a different approach.
Experts predict that the superstore will leverage their brick and mortar presence to fully develop telehealth services. This simple case study stands to highlight the magnitude of increased activity in healthcare mergers and acquisitions. Telehealth services offer economical options and a mutually convenient business model for healthcare providers and patients.
The pandemic created countless shutdowns, closures, and inconveniences that lasted well over one year. However, response to the virus also sparked ingenious remedies and allowed innovative leaders to pivot into viable new business lines within broad industries. The telehealth subset is the perfect example of how investors connected within the pandemic to seek out new opportunities and solutions.
Future Investment Opportunities
Competition within the telehealth space will continue over the next several years. Fierce competitors and industry leaders vying for segment control will outperform, outpace, and outthink the marketplace standards.
For more than a year, healthcare professionals have been challenged at every step in their response to COVID-19. Each facet of the healthcare industry, from research to direct care, has been impacted by the pandemic. An obvious shift in priorities emerged, and niche primary care options cropped up almost overnight. Technological upgrades allowed providers to provide care without coming in contact with every patient.
Emerging Biotech Companies
Companies like SummerBio, Codagenix, and other newcomers offered assistance and ingenuity to healthcare patriarchs. Research giants have made use of countless startups to procure around the clock data streaming in an effort to control the spread of COVID-19. The fast-moving advancements and continual improvements led to multiple vaccines being brought to market in record time. Additional studies are still underway, and biotech companies that emerged for a single purpose are proving to have great value in other healthcare sectors as well.
The explosion of new biotech companies entering the market have given investors and existing biotech giants a reason to pause. Perhaps surprisingly, there was no report of defunct biotech firms. Most existing companies either conserved resources to continue ongoing research, or jumped headfirst into the vaccine research and development race. Longstanding flagships like Merck even showed unexpected growth since the onset of the pandemic.
As the second largest firm in the global vaccines platform, Merck offers hundreds of pharmaceuticals that are effective against many diseases and ailments for both human and animal health. Quickly cornering the market on cancer research, Merck successfully introduced Keytruda. This exponentially popular immuno-oncology drug is anticipated to be the internationally top selling cancer treatment drug within the next five years.
To prepare for future growth and stabilize existing activities, the company is strategically reorganizing internal efforts. One of the major changes is the separation of the Organon line. In short order, the Merck healthcare for women sector of activities will be independently managed as a unique entity.
Valuing Biotech Firms
Unpredictable valuations within the biotech circuit have created wariness among capital providers. Even one or two isolated incidents of unsubstantiated or incomplete valuation reports can be catastrophic for fundraising efforts. Biotech companies depend on investors in order to bring their products or ideas to market. Comprehensive and accurate valuations are imperative.
The only way to gain peace of mind about a monumental investment decision is to consult with a reputable valuation firm with strong expertise. Appraisal Economics’ experienced professionals critically review valuation reports prepared by corporate financial teams as well as independent firms. We have over three decades of healthcare valuation experience, and we go the extra mile for our clients. Contact us today if you would like to learn more.
The Security and Exchange Commission serves investors, registered representatives, and brokerage houses in multiple regulatory and nonregulatory functions. The Division of Corporation Finance recently addressed the accounting of warrants issued by Special Purpose Acquisition Companies, commonly known as SPACs.
The reporting process and accountability for representatives in the financial industry is stringent and full of checks and balances. Organizations like SPACs are especially susceptible to scrutiny and must remain transparent. When Acting Chair John Coates and SEC Acting Chief Accountant Paul Munter recently cited concerns with the accounting for warrants issued within SPACs, other officials quickly took action.
Special Purpose Investment Vehicles
A main concern for authorities, and possibly a contributing reason for the recent probe, is the shifting paper trail of special purpose acquisition companies. These shell-like formations are often set up with the express intent of being a short term fundraising venture. Sometimes referred to as a blank check company, the investment vehicles may cause confusion for independent investors.
Many companies offer warrants to investors as a way of raising capital. A warrant essentially gives the owner the right to purchase shares of a company stock at a point in the future. Shareholders are not obligated to buy shares if they hold a warrant. In most cases, this offering is mutually beneficial to the company and the shareholder.
SPAC pre-revenue and sponsor teams have been awarded warrants for their capital fundraising efforts. These warrants have been classified as common shares of a company stock, regardless of the time or reason for original issue. In short, warrants have always been considered equity and listed as such in pertinent financial records.
Initial and Periodic Valuation Requirements
The initial review by the SEC regulators determined that many SPACs incorrectly classified and accounted for the warrant in their financial records. Current recommendations are expected to include initial and periodic valuations of SPACs and other investment firms issuing warrants.
Under the proposed new SEC guidelines, warrants could be considered a liability for a firm instead of equity. The reason for the proposed change is to standardize warrant contracts for each entity and owner. SPACs and investment firms will be impacted, potentially causing ongoing trading delays.
Accountants and attorneys for SPACs are looking to qualified valuation firms for accurate appraisals of their warrant issues. Appraisal Economics is the perfect partner for warrant valuations. As an industry leader in valuations of options and derivatives, Appraisal Economics is perfectly poised to assess ongoing warrant valuation needs. We are experienced and without conflict, as we do not engage in securities trading. We have already completed numerous valuations of SPAC warrants.
Continued specific guidance from the SEC will provide additional insight as this reclassification of warrants continues to unfold. Periodic valuations are among the best ways to protect your portfolio and interests. Choose a valuation partner that has the capacity and competency to provide the best information and assessments. You can rest assured our team at Appraisal Economics stand ready to fully explain and adhere to SEC guidance concerning your warrant issues.
Texas’ Historic Snowstorm Not Only Wreaked Havoc on Their Power Grid, But on Power Companies As Well
Winter 2021 dumped snow and ice across the nation. Uri is one storm that will go down in history as one of the most devastating natural disasters in history. However, what kind of storm has the power to disable the Lone Star state and bankrupt at least three energy suppliers? The details behind the fallout may surprise the public.
The Calm Before the Storm
Despite meteorological evidence, there was truly no way to predict the ultimate energy demand that Uri would create. Hindsight points to a lack of preparation and undue strain on already weakened grid systems. Historical data simply did not support a need for preparation across every energy system.
Never before did a seasonal weather event affect natural gas, electricity, and renewable energy sources, in addition to other utilities, quite like the recent storm. Families affected by the freezing temperatures could not remember any other time that the weather was so harsh for so long. Likewise, there was no indication that the extended outages would become uncontrollable amid completely unyielding weather conditions.
Multiple communities and an untold number of families were affected by the resonating effects of the harsh and unrelenting winter this year. Pipelines across Texas and much of the Southwest were frozen, stalling the delivery of crude oil and natural gas. One by one, power grids dimmed and finally fell completely dark.
Unable to cope with the crushing blow, energy companies began to assess their financial options. Even with all equipment thawed and working, energy resource reserves were dangerously low. Refineries, wind farms, and suppliers reviewed their losses in terms of long-term impact. Many conducted internal audits and sought external appraisal services.
Industry Giants Surrender
Seven Electric Reliability Council of Texas (ERCOT) board members resigned amid the chaos. The CEO of the regulatory agency was terminated and top executives provided deposition statements about that state of affairs.
Unable to meet financial obligations while waiting for subsidiary payments, Griddy, Just Energy, and Brazos Electric sought relief through public announcements. Unfortunate circumstances surrounding the perfect storm forced one of the oldest and largest power producers in Texas into bankruptcy. In a press release filed by Brazos Electric Cooperative on March 1st, managing members outlined a plan for financial reconstruction.
The initial plan is to prevent further losses and protect members of the cooperative. Understanding the mounting costs and unavoidable pass through to retail customers, the established energy mogul has prioritized action measures. Representatives will assist with ongoing review and investigative resources.
Planning Next Steps
For more than three decades, Appraisal Economics has offered expert appraisals and valuation services specific to the power plant and electric power generation industry. Our leading experts in the field can decipher relevant data and help our clients reach the best outcomes for unique circumstances. Further, Appraisal Economics has extensive experience performing reliable appraisals in connection with complex bankruptcy proceedings.
The major storm in February 2020 ravaged the land from Northern Mexico all the way to Canada. Aside from blizzard conditions, traffic accidents, and loss of business revenue, a much greater fallout occurred. The Texas power crisis proved to be among the worst industry upsets in history. Damage done in less than one week will take years to fully unravel.
More than a decade has passed since the inception of cryptocurrency. Skepticism came in many forms and from many different avenues, but the investment platform remains strong and even continues to expand.
The curious entry of new, non-retail investors opting for crypto now has some financial theorists wondering if cryptocurrency could be on the verge of replacing the gold reserve.
The Rise and Rise of Cryptocurrency
Within the first few weeks of 2021, Bitcoin effectively broke every record high for crypto trading. These unprecedented activity levels created mixed reviews with investors. Analysts were surprised by some of the newcomers on the scene, including hedge funds and Tesla.
Even savvy investors felt a bit of uncertainty surrounding the latest trends and what they could mean for the future of crypto. Would traditional retail investors be pushed out of the market? Is the current bull market an anomaly? A bubble? A sign of what the future may hold? Most importantly, cautious investors want to know when enough is enough.
Measuring a Phantom
Establishing reliable data on the crypto market has not been an easy task for even the most seasoned advisors and analysts. Not only are the underlying investments difficult to accurately follow, but the investors are also temperamental. Determining the valuation with so many variables in play requires expertise that far exceeds industry standards.
Coupled with an extremely volatile trading history, the crypto market faces a litany of speculation from new and current investors. Skittish investors and day traders inflate gains and losses, making it far more difficult to gauge long term outcomes. A current behavioral risk stems from investor activity as the COVID-19 pandemic abates.
If non-retail investors continue to rapidly enter the crypto market just as retail investors pull back, the trend could see a quick upset in the balance of stakeholder volume.
Beyond the Bull
What this means for the bull market, earnings, and future activity depends on your perspective. Tax implications and volatility continue to sway investors toward or away from cryptocurrency. Traders have specific reasons for joining a particular niche or market, and that sometimes includes selling at a loss. Investor activity can be difficult to predict, but general trends develop over time and provide relatively reliable market indicators.
New investors are on the scene, and new currencies are also emerging. Several other currencies have joined the ranks and these newer options are splitting investor loyalties. Stock valuations, by nature, can be particularly detailed. Add in specialty data like that found in hedge funds or cryptocurrencies and you realize the depths required to create an accurate appraisal.
When it comes to decrypting the cryptocurrency market and associated trends, a valuation must be comprehensive and unbiased. Traditional statistics and behaviors must be proportionately compared to irregular factors introduced by stimulus packages and unexpected investors. If you need solid conclusions and trustworthy crypto valuations, trust the experts at Appraisal Economics.
A number of new trading platforms have emerged in an effort to engage new retail investors. The resulting push toward individual wealth management birthed a generation of active day traders. What this group lacks in value they more than make up for in volume.
Financial analysts and economists could not have predicted that this community would engage in battle with hedge funds in a volatile market.
Short Squeeze Recovery
Headlines exacerbate the volatility of high trading days. This generally serves to create more of the same behaviors that sparked the originating activity. The sharp rise in stock prices due to excessive short sells steeply inflate both market activity and demand for a particular stock.
Recent events related to top retail outlets bring light to a new trend of short squeeze activity. Pooled hedge fund investments depend on high trading volumes and turnover to increase returns. Risk management within this investment vehicle requires leverage and impeccable timing.
Worth the Risk?
Short selling is a major strategy for hedge funds. Experienced fund managers are quite familiar with short squeeze tactics and factor in the additional risk when contemplating investment options. The most recent scenarios have some hedge fund risk analysts skittish.
The unprecedented growth of new investors driven by the global pandemic has created a new risk factor that fund managers must now consider. The lure of the return is now balanced with the uncertainty of the outcome. Hedge funds face investment challenges today that simply could not have existed even a decade ago.
Bubbles, bankruptcies, and bailouts are part of the natural investment cycle in a free market economy. Navigating through those circumstances requires a solid understanding of the impact and a plan to circumvent potential disasters. Unfortunately, inexperienced investors make it more difficult for other investors to accurately gauge their own best moves. What retail traders lack in monetary value, they make up for in group numbers and trading volume.
There is no easy answer to the short squeeze dilemma. The potential for fast and steep gains is simply too hard to resist for some investors. Hedge fund managers must be able to effectively delineate between the wants and needs of their investor base.
Appraisal Economics provides exceptional valuation services for hedge funds and private equity firms. Our expert services range from valuations of portfolio companies to complex securities. For over 30 years, we have helped fund managers navigate the challenges surrounding complex valuations.
Promissory notes are issued for a number of different situations. They represent a promise by one party to pay another party a specific amount of money at a future date. Guidelines surrounding the instrument can be vague when it comes to the legalities of an issuance. There are a few ways to confirm if a promissory note is quite literally worth the paper it is written on.
Parties to a Promissory Note
A promissory note is similar to many other business contracts. The issuer, or the borrower, is promising to pay a predetermined amount under specific terms. The holder of the promissory note, also called the payee, agrees to the undersigned terms and conditions of the note.
Both parties are held to the specifications of the agreement. This may include the payment amount, repayment time period, interest rate, and stipulations for nonpayment. Some details, such as the payment date and acceptable methods of payment, may be negotiable and subject to change. Other factors, such as required security instruments and default conditions, are firmly built into the conditions of a promissory note.
Intrinsic Value of a Promissory Note
Similar to other debt instruments, promissory notes offer a level of inherent value. Depending on whether the contract is secured or not, the owner may be able to leverage the value of a promissory note. Sole proprietorships, small businesses, and large corporations all have the capacity to carry line items in their financial records that reference promissory notes.
Simply holding the rights to a debt instrument does not guarantee a steady stream of income. Users are entitled to the funds, but may have to resort to collection activity in order to recoup missed payments. The true valuation of a promissory encompasses both obvious and unseen dynamics. In order to truly understand the full scope of benefits and consequences of a promissory note obligation, a valuation must be performed.
Comprehensive Valuation Processes
Certified valuation experts have the innate ability to analyze promissory notes based on valuation criteria. A comprehensive appraisal process considers a multi-pronged approach to valuing promissory notes. High-net-worth families are often faced with settling an estate that includes one or more promissory notes. Corporations also typically manage a myriad of debt instruments.
Appraisal Economics has decades of experience valuing a wide range of debt securities from simple promissory notes to exotic instruments with complex terms. We have valued unsecured promissory notes due from individuals, illiquid auction rate municipal securities held by publicly traded companies, and credit facilities with complex embedded derivatives. After a thorough analysis, we will provide a complete USPAP compliant appraisal report that clearly details credit risk, intrinsic value, and potential future gain or loss. Please contact us if we can be of assistance.