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given the generated discount of over 65 percent.
Mr. Schneider’s Report
Mr. Schneider accepted Mr. Wahlgren’s marketable-minority
value of the Company stock because he became aware at trial that
the Company had other assets not reflected on its books. He,
however, maintained that the transferred blocks of stock should
be entitled to only a 20-percent discount for lack of
marketability. In his report, Mr. Schneider identified the
following factors as affecting marketability discounts:
1. The asset type held
2. The time horizon until liquidation
3. Distribution of cash-flow
4. Earned cash-flow (after debt service)
5. Information availability
6. Transfer costs and/or requirements
7. Liquidity factors:
a. Is the company large enough to be public?
b. Is there a pool of potentially interested buyers?
c. Is there a right of first refusal?
Mr. Schneider then listed various studies made on marketability
discounts which are cited by Shannon Pratt in his book Valuing a
Business: The Analysis and Appraisal of Closely-Held Companies
(2d ed. 1989). The studies, which deal with marketability
discounts in the context of restricted, unregistered securities
subsequently available in public equity markets, demonstrate mean
discounts ranging from 23 percent to 45 percent. Mr. Schneider
also cited several U.S. Tax Court cases that established
marketability discounts ranging from 26 percent to 35 percent.
Finally, Mr. Schneider stated in his report that he had consulted
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