- 38 -
difficulties; (3) dependence on Mr. DeJoria; and (4) difficulty in
maintaining future growth. Mr. Weiksner believed that these risks
were unique to JPMS at the valuation date and warranted the
discount of the stock.
Mr. Weiksner subsequently calculated the proportionate public
value of the shares and adjusted that value by a 45-percent
discount to reflect minority interest and lack of marketability,16
to arrive at a $20,634,000 to $25,489,000 private value17 for the
1,226 JPMS shares. At trial, Mr. Weiksner suggested a 30- to 50-
percent range for these discounts.
In addition to the comparable companies analysis, Mr. Weiksner
utilized the comparable acquisitions and discounted cash-flow
analyses as confirming methodologies. Mr. Weiksner valued JPMS
through the comparable acquisitions analysis by reference to
private market sales of similar businesses, thereby generating
control values.18 Mr. Weiksner identified appropriate comparable
transactions and measured the enterprise and equity values of
16 A minority shareholder discount reflects the decreased
value of shares that do not convey control of a closely held
corporation. A lack of marketability discount reflects the fact
that there is no ready market for shares in a closely held
corporation.
17 Private value refers to the value of a minority
interest in stock for which no liquid public trading market
exists.
18 Control value is the value of a company in a
transaction in which the acquirer acquires the controlling stock.
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