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Petitioner’s Expert
Petitioner’s expert, Schwartz, based his recommended 40-
percent marketability discount on various studies of restricted
stocks and on various studies analyzing “the relationship between
the prices of companies whose shares were initially offered to
the public (IPO) and the prices at which their shares traded
privately within a short period immediately preceding the public
offering.” Schwartz concluded that these various studies
indicated a “reasonable range” for a marketability discount
between 35 and 50 percent. In valuing the C&L Bailey stock,
Schwartz selected a marketability discount of 40 percent as being
somewhat below the midpoint of this indicated range.
The restricted stock studies that Schwartz relied upon
analyzed stocks that had a holding period of 2 years or less.
The record contains no evidence, however, to support an
assumption that an investor in C&L Bailey would likely have such
a short-term investment horizon. To the contrary, the evidence
in the record strongly suggests that since the inception of C&L
Bailey, there has been no trading of its shares, suggesting that
the hypothetical willing buyer who is representative of
prospective investors in C&L Bailey might well have a longer
investment horizon than the investors of the restricted stocks
analyzed in the studies. Moreover, the restricted stock studies
that Schwartz relies upon analyzed, at least in part, the
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