Summary of "Session 1 (Val Undergrads): introduction to class"

Main Ideas and Concepts:

Class Context and Setting:
- The class is large and held in NYU’s biggest classroom, which the instructor does not particularly like.
- Tuition revenue at NYU is substantial; the instructor humorously notes wanting a bigger slice of that pie.
- The instructor has personal experience with college decisions through his children and notes common myths about NYU classes (e.g., small class sizes, always-available professors).
Class Logistics and Communication:
- Students must use their Stern NYU email addresses to access course materials, including databases like Capital IQ.
- The instructor will send daily emails summarizing class content, assignments, and challenges.
- Lecture notes and materials are digital to avoid printing issues; students can print if they want but are discouraged from using campus printers due to volume.
- Office hours and contact details are provided, with a "fair game" principle: if students find the instructor, he is available to help.
- Teaching assistants (TAs) Jake and Deep will run weekly review sessions.
Class Structure and Delivery:
- The course will begin with quizzes before each session to preview upcoming material.
- The course is about valuation broadly (not just equity), covering public/private companies, startups, mature firms, and various markets.
- Emphasis on valuation as a craft rather than a pure science or art.
- Students will learn by doing; valuation is compared to cooking—you learn by practice, making mistakes, and improving.
- The instructor will provide weekly “valuation of the week” exercises for hands-on learning (starting with GameStop).
- The course will separate the concepts of value (intrinsic worth based on cash flows, growth, risk) and price (market price driven by demand, supply, mood, and momentum).
Philosophy of Valuation:
- Valuation is not a science because it deals with uncertain futures and human behavior.
- Valuation is not an art because it requires discipline and methodology.
- Valuation is best described as a craft that requires continual learning and practice.
- Faith is essential in valuation—faith in your valuation and faith that the market price will eventually reflect value.
- The instructor emphasizes the importance of storytelling alongside numbers; good valuation bridges stories (narratives about the company) and numbers (financial data).
- Students are encouraged to be either disciplined storytellers or imaginative number crunchers, regardless of their natural inclination.
Course Content Overview:
- Sessions 1-2: Big picture introduction to valuation.
- Sessions 3-12: Inputs to valuation (discount rates, cash flows, growth, risk).
- Sessions 13-16: Storytelling and full company valuations.
- Sessions 17-20: Pricing techniques and metrics.
- Sessions 21-25: Applying option pricing theory to valuation.
- Session 26: M&A valuation (focus on value of control and synergy).
- Session 27: Value enhancement (how management can increase company value).
- Final session: Integration and application of course concepts.
Key Valuation Principles:
- Value is driven by three forces: cash flows, growth, and risk.
- Price is driven by demand and supply, influenced by behavioral factors.
- Not all assets can be valued—only those generating cash flows (stocks, businesses, projects).
- Assets like currencies or Bitcoin cannot be valued intrinsically but can be priced.
- Option pricing models will be used to value certain companies with uncertain futures (e.g., biotech startups, commodities).
Student Expectations and Requirements:
- Students should have foundational knowledge in accounting, statistics, and time value of money concepts.
- The instructor offers supplementary materials for strengthening these foundations.
- Active participation and practice are critical; merely attending lectures without engagement will not lead to mastery.
- Group projects are part of the grading; students must find or form groups.
- Grading breakdown: 3 quizzes (10% each), final exam (30%), group project (40%).
- Quizzes are open book/notes but individual work; the lowest quiz score can be replaced by the average of other quizzes.
- Attendance is not mandatory but highly encouraged; classes will be recorded.
Additional Notes:
- The instructor uses humor and personal anecdotes to engage students.
- Emphasizes the importance of separating the concepts of value and price.
- Encourages students to challenge and develop their own valuation stories.
- Warns against overreliance on anecdotal evidence and false precision.
- Provides tools and resources, including a valuation app ("u value") for on-the-go valuation practice.