1
Defining, Measuring &
Defending Discounts for
Lack of Liquidity
© Ashok Abbott, presentation created in collaboration with BVR
A Teleconference from Business Valuation Resources
1-888-BUS-VALU (287-8258)
www.bvresources.com
info@bvresources.com
April 25, 2007
Moderator: Shannon Pratt, CFA, FASA, MCBA, CM&AA, of Shannon Pratt Valuations, LLC
Panelists: Ashok Abbott, M.B.A., Ph.D. of Business Valuation, LLC
Rob Schlegel, ASA, MCBA of Houlihan Valuation Advisors
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Ancillary Reading Materials
• Defining, Measuring & Defending Discounts for Lack of Liquidity PDF and
PowerPoint Presentation
• Does the ‘Myth of Liquidity’ Lead to Incorrect Discounts? special report from the
December 2006 Business Valuation Update
• Full court decisions and Business Valuation Update abstracts for related tax
cases listed on slides 62 & 63 (abstract and decision not available for Barnes v.
Commissioner and abstract not available for Estate of Berg v. Commissioner)
• All downloads and links available at the BVR Teleconference pre-conference
reading page:
http://www.bvresources.com/defaulttextonly.asp?f=tcreading042507
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Learning Objectives
• Learn the distinguishing features between liquidity and marketability
• Learn how to measure discounts for lack of liquidity and the cost of going public
• Learn how to apply our model using recent court cases
• Understand how to utilize this area’s new research in your practice
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Submitting Questions
• Email tc-questions@bvresources.com at any time during the Teleconference
• The final 20-30 minutes is dedicated to telephone questions; the conference
operator will announce Q&A time and provide instructions on how to join the
queue
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Introduction
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Introduction
• Traditionally, appraisers have cited studies of pre-initial public offering and
restricted stock to conclude discounts for lack of marketability in the 2050% range
• Over the last three years, the Tax Court has rejected discounts for lack of
marketability based on the average discount found in restricted stock
studies
• The latest rejection of the Quantitative Marketability Discount Model
(QMDM) was in the Estate of Temple (March 2006)
• There is a trend towards courts rejecting averages, and requiring specific
transactions that are as close as possible to the subject company, and
specific evidence of similar characteristics
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Levels of Value
$12.00 per share
Synergistic (Strategic)
Value
$10.00 per share
Value of control shares
$8.00 per share
“Publicly traded
equivalent value” or
“Stock Market value” of
minority shares if freely
traded
$6.00 per share
Value of restricted stock
of public company
$4.40 per share
Value of non-marketable
minority (lack of control)
shares
20% strategic acquisition
premium
20% minority interest
discount; 25% control
premium
A combined 20%
discount and a 45%
discount for lack of
marketability equals
a total of 56%
discount from value
of control shares
45% total discount
for lack of
marketability (25% +
20% may be taken
additively)
25% discount for lack of
marketability for restricted
stock
Additional 20% discount for
private company stock
(taken from publicly traded
equivalent value $8 per
share)
Control
Premium
Minority
Discount
Discount for restricted
stock of public company
Additional discount for
private company stock
Notes:
· Control shares in a privately held company may also be subject to some discount for lack of marketability, but usually not nearly as much as minority
shares.
· Minority and marketability discounts normally are multiplicative rather than additive. That is, they are taken in sequence:
$10.00 Control Value
- 2.00 Less: Minority interest discount (.20 x $10.00)
$ 8.00 Marketable minority value
- 3.60 Less lack of Marketability discount (.45 x 8.00)
$ 4.40 Per-share value of non-marketable minority shares
Source: Guide to Business Valuations, Exhibit 8.8; it also appears in Standards of Value: Theory and Applications by Jay Fishman, Shannon Pratt and William Morrison, page 132
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Discount Landscape
• Subjective discounts are not acceptable
• Courts have clearly indicated that they are looking for firm specific measures,
supported by clear, relevant, empirical analysis
• Scientific method is required to identify and substantiate discounts
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Core Concepts
• Marketability
• Liquidity
• Holding period
• Liquidation period
• Price pressure
• Price risk/volatility
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Formal Definitions
• Marketability versus liquidity: ASA definitions adopted July 2004
• Marketability: The capability and ease of transfer or salability of an asset,
business, business ownership interest or security
• Liquidity: The ability to readily convert an asset, business, business
ownership interest or security into cash without significant loss of principal
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Marketability & Liquidity: What’s the
Difference?
• Marketability denotes the right to sell an asset in an established and
efficient capital market (public or private), within a reasonable time, with
relatively low transaction costs, and with minimal effect on that security’s
public market price
• Liquidity denotes the ability to convert an asset into cash without
diminishing its value; liquidity is a spectrum
• A block with high liquidity will have low transaction costs, a short liquidation
period and minimal discounts (e.g., bid-ask spread)
• A block with low liquidity will have opposite characteristics
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Marketability
• Registered stock in an Exchange-listed publicly traded firm
• Registered stock in an Exchange-listed publicly traded firm subject to Reg. 144
restrictions
• Unregistered stock in an Exchange-listed publicly traded firm
• Unregistered stock in a closely held unlisted large firm (potential to go public)
• Unregistered stock in a closely held unlisted small firm
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Liquidity Differences within
Marketability Classes
• Liquidity can differ significantly within each marketability class, based on the
attributes of the asset
• A significant block of Dow Jones Industrial Average included firm can be
liquidated relatively easily, while stock of a small over the counter (OTC) firm
may find few buyers in the short run without offering significant discounts
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Publicly Traded Equivalent
Value
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Publicly Traded Equivalent Value
• Capital Asset Pricing Model (CAPM), Ibbottson premiums, or build-up rates
using capital market proxies (e.g., small stock premium) provide an estimate
of the publicly traded equivalent value (“PTEV”) of a privately held company
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Liquidity Assumptions of the Publicly
Traded Equivalent Value
Finance literature recognizes four dimensions of liquidity:
• Width (availability of a large number of buyers)
• Depth (ability to absorb large volume)
• Immediacy (ability to complete the transaction quickly)
• Resiliency (absorbing large volume of trades without moving the price)
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Core Issue in Liquidity: Immediacy
• Assumption: Market orders have immediate execution
• Reality: Small at-the-market transactions of high trading volume public
securities approach immediate execution
• Large block transactions of thinly traded public securities are likely to occur
off the floor or may need to dribble out
• Even for actively traded shares, orders for above 10,000 shares may not be
subject to the current bid-ask quote
• Either way, a substantial delay and blockage discount may be relevant
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Effect of Liquidity on Security Pricing
& Returns
• Research shows significant difference between returns on liquid and illiquid
publicly traded securities:
• Brennan and Subrahmanyam (1996) show the return difference of the
most liquid and least liquid shares on the New York Stock Exchange is
6.62% per year
• This difference roughly translates to a discount for lack of liquidity (DLOL)
of 35.5%
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Bid-ask Spread & Liquidity
• Amihud and Mendelson (1986) demonstrate that stocks with higher bid-ask
spreads have longer holding periods, thus lower trading activity
• Stoll (1978) and Stoll (2000) suggest that trading activity plays an important
role in explaining the cross-sectional variation in bid-ask spreads
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Recent Changes in Market Liquidity
• Difference between liquidity of large market cap stocks and small market cap
stocks has increased
• The holding period for SEC Rule 144 securities has been reduced from two
years to one year
• Bid and ask spreads have declined with the change from fraction-of-a-dollar
prices to decimal prices
• Overall market trading volume has gone up several-fold in recent years; this is
partly attributable to program trading strategies
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Changes in Market Liquidity &
Private Companies
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Changes in Market Liquidity
& Private Companies
• Minority interests in private companies have not benefited from the increased
liquidity in the public markets
• Consequently, the value difference between closely held minority interests and
their assumed publicly traded counterparts has widened in recent years
• SEC empirical studies covered larger publicly traded firms during years in
which the public markets were less liquid; these studies may understate the
actual discount for lack of marketability and ignore the potential discount for
lack of liquidity for smaller firms
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Market Profile : Large Stocks
Average market Capitalization $22,856 Million
Variable
Mean
Std Dev
t
Pr > |t|
No Trade days
0.09%
3.03%
48.5
0.0001
Bid ask spread
3.24%
3.82%
1357.92
0.0001
Cost to trade*
0.49%
142.36%
5.48
0.0001
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Market Profile: Small Stocks
Average market Capitalization $17.70 Million
Variable
Mean
Std Dev
t
Pr > |t|
No Trade days
23.88%
42.63%
848.32
0.0001
Bid ask spread
13.78%
14.40%
1449.00
0.0001
Cost to trade*
10.45%
13.47%
1174.67
0.0001
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Security Markets Liquidity
Differences Between Small and Large Stocks
• There are significant differences among publicly traded firms of different sizes
• Among the smaller stocks, 24% do not trade at all on a given day
• The observed bid-ask spread is around 14%
• The measured cost of trading for small lots for smaller firms is around 10%
• Largest firms are much more liquid, have lower spreads and are less costly to
trade
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Holding Period Vs.
Liquidation Period
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Holding Period
• Holding period is discretionary
• Investors elect to hold an asset for a certain period based on their investment
preferences and expected returns
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Liquidation Period
• Liquidation period is determined by the prevailing market conditions
• Liquidation period the time needed to liquidate a position in a manner that
minimizes the total cost of the price pressure and price risk faced by the seller
in response to the market availability of buyers and sellers
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Discount for Lack of Liquidity
Function of Liquidation Period
• Discount for lack of liquidity is tied to the anticipated liquidation period, not
the discretionary holding period
• A willing buyer will demand a discount to acquire an asset that cannot be
liquidated immediately
• An existing owner will be willing to discount the asset only to the extent of the
anticipated loss of value during the liquidation period
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Mean Liquidation Period: Small Firms
Mean Liquidation Period ( Months) for Small Firms
250
200
150
MLP
100
50
05
20
04
20
03
20
02
20
01
20
00
20
99
19
98
19
97
19
96
19
95
19
94
19
19
93
0
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Mean Liquidation Period: Large Firms
Mean Liquidation Period(Months) for Large Firms
140
120
80
MLP
60
40
20
05
20
04
20
03
20
02
20
01
20
00
20
99
19
98
19
97
19
96
19
95
19
94
19
93
0
19
Liquidation Period (Months)
100
Time
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Price Pressure
• Bid-ask spread
• Listing price (ask)
• Selling price (bid)
• Liquidity can be stimulated by applying price pressure
• Selling pressure results in lower bid price
• Buying demand results in higher ask price
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Market Failure
• Frequently the price impact particularly for small firms or large blocks of large
firms, is severe enough to result in a market failure
• Sellers are not willing to sell at the offered low bid price
• Buyers are not willing to buy at the high ask price
• In such cases an orderly liquidation or dribble out is appropriate
• Market failure is not a concept in appraisals because we have to state a given
value on a specific date (there are no reserve bids)
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Price Risk
• Orderly liquidation exposes the holder to price risk
• Longer liquidation period for volatile assets creates loss of ability to sell at
favorable prices
• Regulatory restraints (e.g.,Reg. 144) can require long liquidation periods
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Marketability Discount
Approaches
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Marketability Discount Approaches
Empirical Studies
• IPO studies
• Restricted stock studies
Theoretical/Quantitative Models:
• Mercer’s QMDM Model
• (Adaptation of Discounted Cash Flow model incorporating an assumed
liquidity horizon)
Option Pricing Models:
• Black Scholes Put option
• Look back Put option
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Empirical Studies
IPO Studies:
• New issue hype
• Data based on insider transactions
• Unpublished studies with noisy data
• Does not address liquidity, only marketability
• Lack of adequate analysis in the valuation report
Restricted Stock Studies:
• Limited and defined holding period
• Established public market
• Transparent financial disclosure
• May or may not address liquidity
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Quantitative Marketability Discount Model
• Discounted Cash Flow model
• Depends on holding period
• Required rate of return
• Growth rate
• Assumptions influence results
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Is Bajaj Right?
• Marketability or liquidity?
• Pricing marketability assuming liquidity
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Put Option Based Models
• Black-Scholes Put
• Factors
• Time to maturity
• Variance of returns
• Risk-free rate
• Exercise Price
• Asset price
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Look Back Put
Measures price risk during period of liquidation
• Ultimate no regret contract
• Estimation requires two parameters
• Liquidation period
• Volatility
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Issues for Consideration
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Issues for Consideration
• Two components of the discount
• DLOM: the cost of going public
• DLOL: the cost of illiquidity (blockage)
• Liquidation period
• Price risk
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Abbott Index: Cost of IPO and DLOL
Cost of IPO
(Discount for lack of marketability)
Discount for lack
of marketability
& liquidity
Discount for lack of liquidity
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Marketability: Cost of IPO
Identify determinants of IPO cost (based on the characteristics of the subject firm):
• Size of the firm
• Size of the block
• Capital market conditions/liquidity/capacity of market to absorb
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Qualitative Costs of an IPO
• The IPO is a costly and risky approaches to raising capital
• Significant expenses are incurred with no assurance that the IPO will be
successful
• It is not uncommon for changing market conditions to cause underwriters to
cancel the IPO at the eleventh hour
• Insiders/affiliates are subject to significant holding period requirements under
SEC Rule 144 and/or underwriter restrictions
• Insiders/affiliates are subject to significant trading restrictions based on
SEC/company restrictions on trading during blackout time periods
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Reported Costs of an IPO
SDC Platinum IPO data (1993-2003) used to estimate the cost of going public:
• Large sample size analyzed - 7,824 IPO’s
• IPO costs documented as
Accounting fees and expenses:
• Legal fees and expenses
• Underwriting fees
• Financial advisor fees
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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IPO Sample Results
IPO costs observed (as a percentage of IPO proceeds):
• 6.05% Trimmed mean
• 6.00% Trimmed median
• 0.42% Trimmed minimum
• 11.20% Trimmed maximum
• 1.79% Standard deviation
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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IPO Costs: Explanatory Factors
• IPO costs, as a percentage of the offering proceeds, decline with increasing
values for:
• Issuing firm size
• Total offering size
• Percentage Firm ownership offered in IPO
• Observed market liquidity
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Regression Results: IPO Costs
Percentage Cost of IPO:
• 4.305% + variable based on total market capitalization rank
• Analysis is broken into deciles based on total market capitalization
Total market capitalization variables:
• 5.663% - total market capitalization rank = 0)
• 4.898% - total market capitalization rank = 1)
• 3.769% - total market capitalization rank = 2)
• 3.051% - total market capitalization rank = 3)
• 2.695% - total market capitalization rank = 4)
• 2.453% - total market capitalization rank = 5)
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Regression Results: IPO Costs
Total market capitalization variables (continued):
• 2.083% - total market capitalization rank = 6)
• 1.677% - total market capitalization rank = 7)
• 1.100% - total market capitalization rank = 8)
• 0.000% - total market capitalization rank = 9)
Other variables:
• -3.311% x market liquidity for capitalization size category = 
• -0.00593 x percentage of firm offered
• -0.00014 x amount of offering in millions of dollars
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Average Market Capitalization for Decile
Rankings
• Rank 0 = $17.7 million
• Rank 1 = $48.7 million
• Rank 2 = $100.0 million
• Rank 3 = $153.0 million
• Rank 4 = $247.7 million
• Rank 5 = $412.6 million
• Rank 6 = $717.0 million
• Rank 7 = $1,295.5 million
• Rank 8 = $2,837.8 million
• Rank 9 = $22,856.2 million
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Cost of IPO: Example
• Total PTEV of equity of company is $180 million
• Subject block is 25% of total outstanding shares
• $45 million in PTEV
• Market capitalization decile is rank 3
• Market liquidity for capital size category 3 = 0.0656
• Cost of IPO equation:
4.305% + 3.051% + (-3.311% x 0.0656) +
(-0.00593 x 25.0%) + (-0.00014 x 45) = 6.795%
• Total discount for lack of marketability = 6.795%
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Cost of Liquidity: Discount for
Lack of Liquidity
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Cost of Liquidity: Discount for Lack Of
Liquidity
• Identify determinants of liquidity (based on the characteristics of the
appropriate publicly traded guideline companies):
• Stock trading volume
• Stock price volatility
• Estimated liquidation holding period (a function of trading volume and
price volatility)
• Develop an objective and statistically supportable metric for estimating risk
exposure and the liquidation holding period
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Longstaff Look Back Put
Longstaff 1995
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Block Size and DLOL
Discount for Lack of Liquidity
30.00%
25.00%
Block 5%
15.00%
Block 10%
Block 20%
10.00%
5.00%
05
20
04
20
03
20
02
20
01
20
00
20
99
19
98
19
97
19
96
19
95
19
94
19
93
0.00%
19
Discount Percentage
20.00%
Time
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Large-Firm DLOL Estimation
Discount for Lack of Liquidity for Large Firms
16.00%
14.00%
10.00%
5% Block
8.00%
10% Block
20% Block
6.00%
4.00%
2.00%
03
20
98
19
93
0.00%
19
Discount Percentage
12.00%
Time
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Small Firm DLOL Estimation
Discount for Lack of Liquidity for Small Firms
60.00%
50.00%
5% Block
30.00%
10% Block
20% Block
20.00%
10.00%
20
05
20
04
20
03
20
02
20
01
20
00
19
99
19
98
19
97
19
96
19
95
19
94
0.00%
19
93
Discount Percentage
40.00%
Time
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
60
Applying the Theories
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Applying the Theories
• One size does not fit all
• Blanket approaches using historical averages are not sustainable
• Case-specific analysis needed
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
62
Tax Cases Phase I
• Estate of Berg v. Commissioner
• Mandelbaum v. Commissioner
• Barnes v. Commissioner
• Estate of Davis v. Commissioner
• Furman v. Commissioner
• Estate of Hendrickson v. Commissioner
• Estate of Weinberg v. Commissioner
• Knight v. Commissioner
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Tax Cases Phase II
• Gross v. Commissioner
• Lappo v. Commissioner
• McCord v. Commissioner
• Okerlund v. United States
• Peracchio v. Commissioner
• Thompson, Estate of Josephine, v. Commissioner
• Temple v. United States 2006
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Where Do We Go From Here?
• Develop testable models
• Empirically validate models
• Apply these models to case-specific situations
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Questions?
• Email tc-questions@bvresources.com at any time during the Teleconference
• The conference operator will provide instructions on how to ask live questions
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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Thank You for Attending!
• Visit www.bvresources.com/conferences for a schedule of exciting upcoming sessions, as
always, Teleconferences are good for two CPE credits
• May 2nd, 409a Compliance featuring Bob Duffy, Scott Beauchene and Joel Johnson
• May 23rd, Playing and Prospering By the New Valuation Rules featuring Al King and Matt
Crow
• May 24th, Overview of Buy-Sell Agreements (part 1 of 3) featuring Chris Mercer
• May 31st, Lost Profit Damages featuring Nancy Fannon, Robert Gray and Thomas Burrage
• June 14th, Application of Buy-Sell Agreements (part 2 of 3) featuring Chris Mercer
• June 26th, Recruiting in the BV Profession featuring Jim Alerding, Megan Nail and Ron
Seigneur
• June 28th, ESOP Valuation featuring moderator Robert Reilly
• July 19th, Buy-Sell Agreements and Valuation Related Issues (part 3 of 3) featuring Chris
Mercer
• July 25th, Electronic Discovery featuring Ron Seigneur, Melinda Harper and Shari Lutz
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity
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CPE Credits
• All BVR Teleconferences are worth two interactive CPE credits
• Be sure to complete the post-conference survey within five business days:
http://www.bvresources.com/defaulttextonly.asp?f=tcsurvey042507
• You should receive your CPE certificate via email within one week
Business Valuation Resources
1000 SW Broadway, Ste. 1200, Portland, OR 97205
1-888-BUS-VALU (287-8258) / Fax: 503-291-7955
www.bvresources.com
info@bvresources.com
Business Valuation Resources Teleconference
April 25th, 2007 – Defining, Measuring & Defending Discounts for Lack of Liquidity