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dividend accruals. The par value of Specialty preferred stock,
$1, multiplied by the number of outstanding shares, 100,000,
yielded a prediscount value of $100,000. Mr. Browning applied a
marketability and liquidity discount of 35 percent and a minority
interest discount of 25 percent based on lack of dividend
distributions, a long-term investment holding period, and
minority shareholder interest positions. Mr. Browning combined
the two percentages and applied a 60-percent discount, resulting
in a value for the Specialty preferred stock of $40,000, or $.40
per share.
iii. Valuation of JM and Specialty Common Stock
The common equity values for JM and Specialty were
calculated by subtracting the total preferred stock values from
the total equity values and then applying discounts for
marketability and liquidity, and minority interest
considerations. The total preferred stock values of JM and
Specialty, $69,000 and $40,000, were subtracted from the total
equity values, $435,000 and $200,000, which produced prediscount
common equity values of $366,000 and $160,000, respectively. Mr.
Browning selected a 35-percent lack of marketability and
liquidity discount for the common equity of JM and Specialty
based on considerations that the companies had low collateral
values, high industry and customer concentration, transaction
costs, a relatively small shareholder base, and a minority
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