Misusing the Market Prices of High-Vote Shares When Estimating a Discount for Lack of Voting Rights

Business Valuation UpdateVol. 28 No. 7
July 2022
Gilbert E. Matthews, MBA, CFA
discounts & premiums
discount, minority interest, nonvoting stock, discount for lack of voting rights

Summary

When analysts estimate a valuation discount for the lack of voting rights in the stock of a private company, they typically look to the public market. Many studies have compared the market prices of publicly traded high-vote shares with the market prices of publicly traded low-vote shares. Unfortunately, when the inputs into these studies are examined, the emperor has no clothes.