- 43 -
(2) the swing block potential of each such block; (3) the public
awareness or exposure of the business or assets of ADDI&C; (4) the
type of business in which ADDI&C was engaged and the composition
and relative attractiveness of its assets; (5) the financial
strength of ADDI&C and its potential for paying dividends; (6) the
basis of value and the method of value used to determine the asset
value of ADDI&C; and (7) any other relevant factors that could
influence the marketability of each of the blocks of stock at
issue. Mr. Thomson concluded that the first six of the foregoing
factors tended to lower the lack-of-marketability discount that
should be applied to each of those blocks.22 Consequently, he
lowered the base range of 33 to 36 percent that he had used as a
starting point to 20 to 24 percent. He then selected 23 percent
as an appropriate lack-of-marketability discount.23
Respondent points out that neither Mr. Howard nor Mr. Pratt
specifies in their respective expert reports and rebuttal reports
how each used the restricted stock and IPO studies as well as
factors specific to ADDI&C and each of the blocks of stock in
question in order to arrive at a 35-percent lack-of-marketability
22 Mr. Thomson determined that the seventh and last factor,
which gives consideration to ADDI&C's built-in capital gains tax,
should increase the lack-of-marketability discount that he
otherwise determined by $10,578,516.
23 Taking account of all the factors, including ADDI&C's built-
in capital gains tax, that Mr. Thomson concluded were proper in
arriving at the lack-of-marketability discount to be applied in
valuing each of the two blocks of stock at issue, he determined a
38-percent lack-of-marketability discount.
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