VRC’s Managing Director Adam Smith and Managing Director and Head of Capital Markets Research Carla S. Nunes were featured in a recent Private Funds CFO article examining how the SEC’s proposal to allow public companies to report financial results semiannually could affect valuation practices.

In the article,”SEC’s Reporting Overhaul May Complicate Valuations,” Smith and Nunes provide insight into how reduced reporting frequency could affect the quality and timeliness of public market data used in private company valuation analyses.

Nunes noted that core valuation methodologies would remain unchanged but adjustments may be needed for the timeliness of public market inputs.

Smith highlighted the potential for greater valuation uncertainty if market participants are required to make decisions with less current information: “The less data we have, the more opaque our view into those perspectives will be. The proposal could create more volatility in times of stress and market stress.”

According to the article, private equity firms may continue to produce quarterly valuations even if some public companies move to semiannual reporting, creating a potential disconnect between valuation reporting requirements and the availability of public market data. As a result, valuation professionals may need to apply greater judgment when selecting comparables, evaluating source data, and assessing market conditions.