“Virtually every ESOP appraisal that has been written in the past 10 years has concluded that, both in the case of purchases of company stock by an ESOP from direct shareholders and in the case of subsequent distributions and repurchases of company stock to and from plan participants, the discount for lack of marketability is greatly diminished by virtue of the ESOP ‘put option,’” writes John D. Menke
(The Menke Group), whose new article
reviews the origin and development of the put option argument in appraisal literature, including the first edition (1981) of Shannon Pratt’s Valuing a Business
. Menke ultimately concludes “that (1) the put option argument is fallacious with respect to purchases of company stock from direct shareholders, and (2) nevertheless, there should be no marketability discount with respect to purchases of company stock from direct shareholders.”
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