Stock Market Valuation with Real Options:: lessons from Netscape

Adrian Buckley (First Author), Kalun Tse (Participant Author), Hans Eijgenhuijsen (Participant Author), Herbert Rijken (Participant Author)

    Research output: Contribution to journalJournal


    Discounted cash flow is the main tool for valuing projects and companies. Real options techniques can augment valuation. The case of Netscape is used to demonstrate this. We begin with a defensive cash flow scenario. On top of this, we superimpose a number of real options valuations. Some experts would dispute our methodology because it is not built upon market-priced risk. Nonetheless, it provides an approximate valuation. We prefer equity valuation using various methodologies, including real options where appropriate, to arrive at a range of value. But we cannot, using financial logic, justify the high Netscape flotation price.
    Original languageEnglish
    Pages (from-to)512-526
    JournalEuropean Management Journal
    Issue number5
    Publication statusPublished - 2002


    • Competitive advantage period
    • Real options
    • Stock market valuation
    • Volatility

    Indexed by

    • Scopus


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