So if Snap has a 1 percent chance of reaching a valuation of $100 billion, the value of that chance is $1 billion.
One way (and there are many ways) to think about this, is the chance that Snap has to hit a certain valuation reflected as follows:
Basically, Column 1 is the chance of meeting the valuation in Row 2.
Someone without a taste for risk would prefer paying for a 99 percent chance of getting $1 billion which would be valued at $1.01 billion.
Of course, that range was very, very carefully managed by the bankers to ensure a successful pricing
that at least was above Snap’s private valuation of $20 billion in May 2016.
But the chance of Snap being worth below its pricing valuation of $24 billion is 64 percent.
That will value the company at nearly $24 billion and make the company’s founders, Bobby Murphy and Evan Spiegel, worth more than $3 billion each.
