Exclusive DLOM survey: Use of benchmark studies decline slightly

BVWireIssue #170-4
November 30, 2016

While restricted stock studies and pre-IPO studies remain the most cited methodologies for quantifying a discount for lack of marketability (DLOM), their usage has declined a little, according to final results of our DLOM survey. Over 100 respondents participated in the survey, and here are some highlights:

  • Three-quarters (76%) of respondents say they use restricted stock studies (RSS), down slightly from 79% in 2013—but sharply lower than the 90% usage rate reported in 2009.
  • Reliance on pre-IPO studies is also down a bit, to 43% from 47% in 2013. In 2009, over half (52%) said they use this method.

Full results: A complimentary download of the survey results is available if you click here. The survey offered over 20 specific DLOM methods to choose from, and it distinguished between general restricted stock studies as well as restricted stock equivalent analyses (which 21% say they use) and the FMV Restricted Stock database (56% use it, up from 44% in 2013). As for some other methods, the usage of the Quantitative Marketability Discount Model (QMDM) declined from 18% in 2013 to 12% this year, and a third (34%) of respondents use Partnership Profiles (down from 44% in 2013).

The results don’t immediately signal any tidal shift in usage of methods, although we point out that the use of option price models has gained steam. The Finnerty model is used by 20% of respondents (up from 9% in 2013), and the Longstaff model saw similar gains (13% in 2016 versus 6% in 2013). The Chaffee model saw a slight increase, from 9% in 2013 to 10% this year.

Extra: For more on DLOM, attend a special four-hour DLOM Day: An Advanced Workshop on December 8.

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