| Since the beginning of the 21st century,the Internet industry has rapidly developed in our country.The mergers and acquisitions,IPOs,restructuring activities in the industry have not only become the most concerned topic in the capital markets,but also drawn much attention in our society.With the frequent and quick upgrading of information technology in the industry,Internet companies have strong growing potentials yet with consecutive losses.Traditional valuation methods can be hardly applied.It is essential to find a way to value Internet companies.With consideration of the current situation and economic characteristics of Internet industry in China,this paper compares the applications and limitations of traditional valuation methods,and introduces a hybrid valuation method for Internet companies—DEA-based Multiple Valuation Approach.At first,this paper analyses the status quo of Chinese Internet companies,pointing out the differences on the growth features and business model from traditional business.This paper then discusses the commonly used traditional valuation methods by categorising them into absolute valuation techniques and relative valuation techniques,analysing the applications and limitations of these traditional methods on valuing Internet companies.Lastly,an integrated valuation method combing DEA model and relative valuation techniques,e.g.financial matrix such as P/S,P/Gross Profit,and non-financial matrix P/Monthly Active Users,is introduced to value Chinese Internet companies.The data used comprises listed Chinese Internet stocks on NASDAQ,and the valuation period is set to be in 2015,This paper tests the impacts of different input variables(DEA),selection of comparable companies,and multiples,on the accuracy of the valuation by this approach.After comparing the valuation results and the real market value of the sample companies,this paper concludes that the DEA-based Multiple Valuation Approach is reasonable and practical in valuing Chinese Internet companies. |
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