Restricted stock studies and pre-IPO studies remain the most cited methodologies for quantifying a discount for lack of marketability (DLOM), according to the results of our DLOM survey. Seventy-five percent of respondents (compared to 76% in our 2016 survey) use restricted stock studies, and 38% (down from 43% in 2016) use pre-IPO studies.

Other DLOM methods and tools cited include: Johnson/Park empirical method (Partnership Profiles) (32%), restricted stock equivalent analysis (19%), Finnerty study (18%), Longstaff study (13%), Chaffee study (12%), Pluris data (11%), and quantitative marketability discount model (QMDM) (11%). Thirty-nine percent of respondents use the Stout Restricted Stock Study (formerly FMV Opinions), and 14% of respondents cited the VPS DLOM Guide and Toolkit. Respondents were allowed to choose more than one method or tool.

Other results:

• Nearly all (92%) of the respondents quantify separate discounts for a minority interest and lack of marketability when the valuation requires both; and
• Three quarters of the respondents say that they “routinely” consider the 10 Mandelbaum factors in determining DLOM. Of all the factors, “restrictions on transferability” and “amount of control in the transferred shares” are the two most cited factors considered. The factor least cited was “costs associated with a public offering.”

We received 96 responses to the survey, which was conducted from September 19 to September 28. We’ll have more results in next week’s BVWire, and we will prepare a document with the full results that will be available to everyone. Thank you for your participation!