Difference between revisions of "Fair Price"

Revision as of 14:30, 16 February 2014

The Fair Price applies only to a FairShares Company - there is no equivalent concept in a FairShares Co-operative.

The Fair Price is the current price of 1 Investor Share. It is defined in Clause 15 and calculated each year by dividing the Reference Value of the organisation by the number of Investor Shares that have been issued to members.

The process for valuing a FairShares Company or Co-operative is defined in Clause 13. Each year, a new Reference Value is calculated by adding the book value of fixed assets (i.e. buildings, property, machinery minus depreciation) to 20 times the Investor Share distributed in the previous accounting period.

For example, if a FairShares Company owns a property valued at £300k, and generates an Investor Share of £25k the previous year, then the new Reference Value will be:

£300,000 + (20 x £25,000) = £800,000

The Fair Price is then calculated by dividing the Reference Value by the number of Investor Shares issued. If the number of Investor Shares in issue is 500,000, the Fair Price is:

800,000/500,000 = £1.60.

It is recommended (following practice at Gripple) that the Fair Price is kept below £5. Should it rise above this level, the Board can recommend doubling the number of Investor Shares issued to halve the price and bring it below £5.

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