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approach was to examine publicly traded companies and to compare
sales of stock in the companies on a public market with other
sales of stock in the same companies on a restricted market. To
do this, Mr. Egan examined sales of unregistered shares of stock,
which were sold in private, unregistered transactions. Mr. Egan
reviewed a list of 137 private placements of shares of stock. He
then removed certain sales that he did not feel were comparable
to a sale of stock in JFI, such as sales where the common stock
of the company was not traded on an open market or where the
company had had a recent public offering; sales involving “start-
up companies”, defined as companies with less than $3 million in
sales; and sales involving companies the stock of which was
traded on a large stock exchange such as the New York Stock
Exchange. From the remaining list, he computed a median discount
of 29.1 percent.
From this figure, Mr. Egan made an additional adjustment of
5.9 percent to account for two differences between the JFI stock
and the unregistered stock he was examining: (1) Unregistered
stock in general can, within 2 or 3 years, be sold on a public
market, making it more marketable than stock in JFI; and (2) JFI
was not held to the same disclosure standards as public
companies, making the stock in JFI less marketable, in Mr. Egan’s
view. Mr. Egan’s final lack of marketability discount was 35
percent (29.1 percent + 5.9 percent). Applying this discount to
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