The Executive Suite: How to Calculate An Unrealized Gain or Loss for Private Equity

Saturday, September 28, 2013

How to Calculate An Unrealized Gain or Loss for Private Equity

When you make a private equity investment, your gain or loss is only realized once you sell the investment. In the meantime, you will probably want to know whether your investment has increased or decreased in value. You can find this out by calculating the unrealized gain or loss. This is an estimate of the change in value to an investment that has not yet been sold.

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Estimate the current value of the company. If the company has not yet gone public, you can estimate the value based on recent investments by other private equity investors. For example, if investors have paid $10,000 for a 10 percent stake in the company, then the value would be $100,000. If the company has gone public, calculate the value by multiplying the stock price by the number of stocks outstanding.
Multiply the value of the company by your stake in the business. For example, if you own 20 percent of the company, and it is valued at $200,000, then your investment is worth $40,000.
Subtract your original investment from the current value of the investment. A positive number indicates that you have an unrealized gain, while a negative number reflects an unrealized loss. For example, if you made a private equity investment of $10,000 and it is now worth $12,000, it would indicate an unrealized gain of $2,000. If you made the same investment, but it is now worth $8,000, then it indicates an unrealized loss of $2,000.