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Question from auditor

Carta Admin posted 10-04-2022 11:11

Hi there,

For the options expense, our auditor asked the following question on the volatility. Could you please help? thanks!

For the volatility, we found that the difference was due to that Carta applied the mean of the peer company’s volatility when estimating the FV of the option, but applied the 75th percentile of the peer company’s volatility when estimating the share price. Could you please inquire Carta about the reason for the appliance of a different methodology?

Carta Support posted 10-04-2022 11:12

Methodology in determining the FMV, and its assumed volatility rate, requires consideration to many more variables compared to the valuation of a single grant.

Given that a company has relatively limited access to capital, is operating at a cash flow deficit, is substantially smaller, and has a more limited operating history than the comparable companies it was deemed reasonable to make a volatility selection at the higher end of the range.

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