Estate of Lewis A. Bailey, Deceased, Frances Jeanette Foster, Executrix - Page 27

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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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Last modified: May 25, 2011