Hedging and the estimation of marketability discounts
When estimating discounts for lack of marketability, many analysts do not consider the differences between various types of restrictions on marketability.
A Hybrid Restricted Stock/Pre-IPO Data Point: Lack of Marketability Discount for ESOPs
When SAIC went public, the company and the process provided empirical support for a discount for lack of marketability to be used as a reference for ESOPs.
Stout Restricted Stock Study & DLOM Calculator
The discount for lack of marketability:an examination of Dr. Bajaj's approach
During the past few months, I have been asked if our publication printed or intended to print a rebuttal to Dr. Bajaj's study on discounts for lack of marketability.
Quantifying DLOMs for Minority and Controlling Interests
The discount for lack of marketability is one of the largest and most important adjustments made in the valuation of a privately held business. It is crucial to understand that an investor purchases the privately held interest at a discount to increase the rate of return on the investment. This increased rate of return offsets the additional risk the lack of marketability of the investment causes. This webinar will discuss how to use this concept ...
Empirical Method for Determining DLOM
The vast majority of business appraisers still rely on the restricted stock studies to determine a discount for lack of marketability (DLOM) in their standard practice of valuing a closely held, noncontrolling interest. These studies, shown in Exhibit 1 ...
Lance Hall to intern: Welcome to the valuation world
Critics of the FMV Restricted Stock Study (and restricted stock in general) make three common mistakes, says Lance Hall ...
Tax Court Allows for ‘Slight’ Discount for Lack of Control for Majority Interests in Real Estate Holding Companies
In a gift and estate tax dispute, the estate and Internal Revenue Service agreed to apply discounts for lack of control and marketability to the majority interests in a number of real estate holding companies. The U.S. Tax Court noted that, in prior decisions, the court found no discount for lack of control applied. However, given the parties’ agreement, here, the court said it would apply a “slight” or “low” discount.
IPOs at 4-year high in 2004; Pre-IPO discounts hold steady
The IPO market rebounded in 2004 from a severe three-year depression in 2001-2003, and average discounts in the one to two years Pre-IPO time frame for transactions prior to the IPO’s essentially held steady compared to the prior three years but were belo ...
Latest LEAPS Study Sheds Light on Company Size and DLOMs
It is well accepted by now that company size affects the size of the discount for lack of marketability (DLOM): The smaller the company, the larger the discount. It is also commonly accepted that the longer the likely holding period of a closely held inte ...
Limited partnership unit sales show large discounts from net asset value
This article focuses primarily on discounts for limited partnership interests, and also mentions discounts from net asset value (NAV) for companies in corporate form, detailing a few of the authors' own experiences in reaching settlements with the IRS.
BVR's Guide to Discounts for Lack of Marketability, Fifth Edition (2 Volumes)
August 2013 978-1-62150-025-4 Hardcover, PDF (644 pages)
John Stockdale Sr.
Business Valuation Resources, LLC
Estate of Berg v. Commissioner
Issues are appropriate minority and marketability discounts to be applied to petitioner's stock in a closely held real estate holding company, and underpayment penalties.
Partnership discounts from NAV lower in 1997
Courts and other reviewers of business appraisals are becoming increasingly demanding about getting specific market-comparable data, as opposed to just generalities or broad averages. To this end, t ...
Deal and Market Data Details
Details of transactions in our deal and market data platforms.
CLAIMS COURT ADDRESSES VALUATION OF RESTRICTED STOCKS IN LITMAN V. UNITED STATES
Valuations of stock subject to either contractual restrictions or Securities and Exchange Commission restrictions (i.e., restricted stock) are often performed for estate tax, gift tax, and income tax purposes. One important procedure in the valuation of ...
Discounts for Lack of Marketability and Related Discount Issues
Discounts for Lack of Marketability and Related Discount Issues Teleconference Handbook October 2, 2008 Moderators: Mel H. Abraham, CPA, CVA, ABV, ASA, and Brian K. Pearson, CPA/PFS/ABV, ASA ...
Tax Court Recognizes Discount for Trapped-In Capital Gains
The issue in this case was the value of each of two 25-share blocks (out of 97 shares outstanding) of ADDI&C, gifted on Nov. 21, 1992.
Discounts for Lack of Marketability for Closely Held Business Interests
October 2001 Discounts for Lack of Marketability for Closely Held Business Interests by Maher, J. Michael Discounts for Lack of Marketability for Closely Held Business Interests By J. MICHAEL MAHER From his study, the author concludes that most appraisers underestimate the proper discount for lack of marketability. The results, he says, seem to indicate that this discount should be about 35%. ONE OF THE MOST RAPIDLY changing areas affecting the valuation of closely held ...
Assignee Interest Not Subject to Liquidation Rights
The U.S. District Court for the Northern District of Texas applied valuation discounts in determining the value of an assignee interest in a dissolved Texas general partnership.
Liquidity and levels of value: A new theoretical framework
The author provides an illustration of the use of restricted stock studies in a two-step process to estimate the discount for lack of marketability for a closely held stock.
Marketability discounts trending downward
Since its creation in the mid-1990s, the Valuation Advisors DLOM Study™ has grown to encompass over 3,800 Initial Public Offering (IPO) transactions.