- 40 -
that is restricted from trading on the open market for a certain
period) took place compared to the prices on the open market of
identical but unrestricted stock (i.e., stock of public companies
that is freely tradable on the open market). Mr. Howard also
relied on one so-called initial public offering (IPO) study cited
in his expert report that shows the amounts of discounts at which
private transactions in stock occurring shortly before an IPO took
place compared to the prices of such stock after an IPO. In other
words, that IPO study analyzed the prices of stock in private
transactions compared to the prices of subsequent public offerings
of stock of the same companies.
Mr. Pratt determined to apply a 35-percent lack-of-
marketability discount by relying on the same restricted stock
studies and the same IPO study on which Mr. Howard relied as well
as on an additional restricted stock study and an additional IPO
study.20 In addition, Mr. Pratt considered ADDI&C's history as of
the valuation date of not paying dividends in determining that
discount. In order to ascertain whether the aggregate amount of
the minority discount and the lack-of-marketability discount that
he separately determined was reasonable, Mr. Pratt also examined
certain transactions involving the trading of units of various
publicly registered limited partnerships (limited partnership
units) that were not trading on a formal exchange such as the
20 In his rebuttal report, Mr. Howard also considered the
additional restricted stock and IPO studies on which Mr. Pratt
relied in his expert report.
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