Discount for Lack of Marketability Guide and Toolkit

May 2017 Hardcover, PDF

James Hitchner, Jim Alerding, Josh Angell, Kate Morris

Valuation Products & Services

The estimation of a discount for lack of marketability (DLOM) is under increased scrutiny by users of valuation reports, the IRS and others. The VPS DLOM Guide and Toolkit by Jim Hitchner, Jim Alerding, Josh Angell, and Kate Morris is designed to provide the information and tools necessary to properly calculate and support a DLOM using both qualitative and quantitative methods.

The Guide includes a comprehensive discussion of the current theory, empirical studies, databases, and methods used to determine DLOMs, and the Toolkit offers 10 downloadable Excel files that incorporate a groundbreaking DLOM calculator which includes a new and transparent restricted stock model, alternative option models, and Quantitative Marketability Discount Model (QMDM). Strengthen your understanding of the DLOM methodology and save time on this often complex process with this powerful new resource.

PLEASE NOTE: The VPS DLOM Guide is available for purchase in print, PDF, or both print and PDF. The VPS DLOM Guide + Toolkit includes both the print and PDF formats of the Guide, plus the DLOM Toolkit itself. If you purchase the Toolkit, ensure that you have the latest version of Adobe Reader on your computer.  Also, for the best performance, we recommend that you download and save the Toolkit to your computer rather than opening it up directly from the link.

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Additional Product Details

Highlights of the DLOM Guide:

  • A strong basis to understand and calculate a supportable discount for lack of marketability
  • Navigate through DLOM approaches, methods, and studies from past and present including analysis of their strengths and weaknesses
  • Explore a summary of different option methods and case studies that illustrate the application of the different methodologies
  • Get detailed analyses of restricted stock transaction databases
  • Understand how the courts view DLOM with access to relevant court case summaries

Highlights of the VPS DLOM Toolkit*:

  • Allows for a detailed comparison of subject company characteristics to restricted stock transactions, adjusting the data for differences in holding period and volatility between the subject and the transactions.
  • Offers the most comprehensive DLOM toolkit available that includes:
    • VPS Restricted Stock Study Quintile Calculator (RSQC), which enables the user to adjust for differences in risk/volatility, holding periods, dividends, and Mandelbaum-type factors
    • Option Pricing Calculators:
      • Black Scholes/Chaffe Calculator
      • Finnerty Calculator
      • Ghaidarov Calculators
      • Longstaff Calculator
    • QMDM Template
    • Quantitative Methods Comparison Template
    • Illiquidity Premium Calculator
    • C Corporation Equivalent Dividend Yield Calculator
  • Save significant time and expense by simplifying a complex process - includes 10 downloadable Excel files that incorporate a groundbreaking DLOM calculator. Also includes a manual with easy-to-understand instructions for the calculator

*Note: The DLOM Toolkit requires use of the Stout Restricted Stock Study, available for purchase through BVR.

Table of Contents

  • CHAPTER 1
    The Foundation for Discounts for Lack of Marketability
  • CHAPTER 2
    Lack of Marketability Versus Lack of Liquidity
  • CHAPTER 3
    Levels of Value – A Conceptual Framework
  • CHAPTER 4
    Entity-Level Versus Shareholder-Level Discounts
  • CHAPTER 5
    Approaches and Methods of Quantifying DLOM
  • CHAPTER 6
    Overview of Restricted Stock
  • CHAPTER 7
    Characteristics of Companies Issuing Restricted Stock
  • CHAPTER 8
    Discounts on Restricted Stocks
  • CHAPTER 9
    Hypotheses Explaining Discounts on Restricted Stock
  • CHAPTER 10
    Factors Affecting Restricted Stock Discounts
  • CHAPTER 11
    Methods for Calculating DLOM Using Restricted Stock
  • CHAPTER 12
    Review of Large Block Data
  • CHAPTER 13
    Criticism of Restricted Stock Studies
  • CHAPTER 14
    Summaries of Restricted Stock Studies
  • CHAPTER 15
    Pre-IPO Studies
  • CHAPTER 16
    Application of a DLOM/DLOL to a Controlling Interest
  • CHAPTER 17
    Factors Affecting DLOM
  • CHAPTER 18
    Acquisition Method for Calculating a DLOM
  • CHAPTER 19
    Option Pricing Models
  • CHAPTER 20
    A Practical View on How the Market Prices Restricted Stock
  • CHAPTER 21
    Shareholder Cash Flow Adjustment Models
  • CHAPTER 22
    Other Models Based on Market Data
  • APPENDIX A
    Case Study and Sample Report Language Non-Dividend-Paying Company
  • APPENDIX B
    Case Study and Sample Report Language Dividend-Paying Company
  • APPENDIX C
    Discount for Lack of Marketability
  • APPENDIX D
    “Do Put Option Models Overstate Discounts for Lack of Marketability?”    
  • APPENDIX E
    Definition of the Coefficient of Determination r2
  • APPENDIX F
    Summary User Manual: Discount for Lack of Marketability Toolkit
  • APPENDIX G
    Stout (formerlyFMV Opinions) Restricted Stock Database
  • APPENDIX H
    Pluris DLOM Database Exhibits
  • APPENDIX I
    FMV Opinions
  • APPENDIX J
    Court Case Summaries
  • BIBLIOGRAPHY
    • Articles
    • Books
    • Websites & Blogs
    • Other
    • Referenced Court Cases