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Shriner applied a 20-percent discount for marketability. To
calculate the marketability discount, he first derived a 32.89-
percent discount by averaging the discounts found in various
restricted stock studies. He reduced that amount to 20 percent
to account for his belief that the insurance industry was more
stable than the general market.
Like Shriner, Spiro found that the average marketability
discount based on restricted stock studies was between 30 and 35
percent. Spiro also found that initial public offering studies
show an average marketability discount of nearly 45 percent.
Spiro considered the fact that WSA’s very specialized operations
would limit potential buyers and detract from the stock’s
marketability. He also considered the size of the block of stock
and elements of control which could enhance marketability. After
listening to testimony at trial, he stated that a discount for
lack of marketability of 40 or 45 percent would be appropriate to
account for the risk due to the pending Rate Bureau litigation.
We conclude that a 35-percent discount for lack of marketability
applies.
We disagree with Shriner’s reduction from about 33 percent
to 20 percent because we do not believe WSA was as stable as the
insurance industry average. We disagree with Spiro’s increase
from 35 percent to 45 percent, not because the Rate Bureau
litigation should not be considered, but because we believe a 35-
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Last modified: May 25, 2011