- 36 -
Petitioner's expert also cited a 1994 Wall Street Journal
article which applied a discount for lack of marketability
because of a SEC regulation that requires foreign investors to
hold shares they buy from public companies for 40 days before
they can sell the shares in the United States if they do not
register or disclose the sale. However, petitioner did not show
that the corporations in the article were comparable to Western
National Bank or that a 40-day restriction applies.
Respondent's experts applied a 10-percent discount for lack
of marketability to the stock of Kosman, Inc. They said that
the smaller the block of privately held shares, the greater the
discount for lack of marketability owing to the minority
interest. They said a study by FMV Opinions, Inc. (FMV study),
found marketability discounts of companies, such as Scottsbluff
National Bank, with earnings of over $1 million ranging from 10
to 20 percent. They interpreted the 10- to 20-percent range in
the FMV study to be the total discount for marketability. They
believed an additional 10 percent discount for lack of
marketability was proper because, when added to the 9-percent
discount for marketability they applied for Scottsbluff National
Bank, the total (19 percent) discount was at the upper range
reported in the FMV study.
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