What is Valuation Divergence?

Valuation divergence refers to the difference between the growth rate of a company's valuation and the valuation of the shares that investors received. It can be due to a number of factors including: dilution by subsequent investors, and the exchange of a convertible note for equity. Valuation divergence is common in high growth companies and typically ranges from 3-5x.

What does divergence mean in simple terms?

Divergence means two related things start moving in different directions. It shows that their usual relationship is no longer matching up.

What does divergence mean in trading?

In trading, divergence is when price moves one way while an indicator moves the opposite way. Traders often see it as a sign that momentum may be weakening or a trend might reverse.

What is divergence in economics?

In economics, divergence refers to countries or regions growing apart in development or performance. It highlights widening differences instead of becoming more alike.

What does valuation mean in trading?

Valuation in trading is the process of determining what an asset is actually worth. It helps traders judge whether something is overpriced, underpriced, or fairly valued.