Pluris Finds Corporate Reaction Split On Auction-Rate Securities
Pluris Valuation Advisors LLC
David P. Kowal, APR
NEW YORK, N.Y., March 5, 2008 – Pluris Valuation Advisors announced that it is now offering valuations of auction-rate securities in response to changes in the market.
Until recently, auction-rate securities (ARSs) were viewed as a stable, low-risk “cash equivalent” investment. However, over the past several weeks, many auctions have failed, leaving investors without the ability to cash in their ARSs. Historically, a large portion of “cash equivalents” held by public companies has been invested in auction-rate securities. Now, with liquidity drying up, many are forced to write down their values.
“Because of the sudden lack of liquidity, certain auction-rate securities are now worth less than par value,” according to Espen Robak, president of Pluris Valuation Advisors. “But how much less?”
Robak noted that in coming weeks, “We may see significant disagreement between auditors and their clients over how ARSs should be valued. Not all ARSs have been affected equally by the auction crisis.. Many positions will still be valued at par, while others may require discounts.”
Pluris' proprietary LiquiStat? database contains transaction data from the secondary market for auction-rate securities, including the Restricted Securities Trading Network (RSTN).
“FAS 157 and other accounting rules require the use of market-based data for valuation whenever it is available,” according to Robak. “Valuations can fluctuate dramatically, given changing market conditions, so it is important to have access to the latest and best data. Given the ongoing failure of auctions for these securities, secondary market sales ? at a discount ? may be the only way for some investors to get out of their positions.”
He added that the LiquiStat? database will track trades of ARSs in real time, providing the most accurate, up-to-date data available.
Pluris provides valuation of other illiquid assets as well, including restricted securities and stock options. Its valuations are used for financial reporting, tax purposes, business transactions and litigation support.
About Pluris Valuation Advisors
Pluris Valuation Advisors, Inc. of New York, N.Y., is a full-service valuation firm specializing in the valuation of restricted securities of public companies and other assets that lack liquidity. Additional information is available at www.PlurisValuation.com.