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designed to reflect the fact that there is no ready
market for shares in a closely held corporation.
Although there may be some overlap between these two
discounts in that lack of control may reduce
marketability, it should be borne in mind that even
controlling shares in a nonpublic corporation suffer
from lack of marketability because of the absence of a
ready private placement market and the fact that
flotation costs would have to be incurred if the
corporation were to publicly offer its stock. * * *
c. Basic Discount for Lack of Marketability
Dr. Bajaj’s 25-percent marketability discount is based upon
a number of empirical studies, his critical evaluation of those
studies, and his own multiple regression analysis of the
“explanatory variables”. Dr. Spiro, in his rebuttal testimony,
finds no fault with Dr. Bajaj’s methodology.
Dr. Spiro cites many of the same empirical studies as
suggesting that liquidity discounts can range from 10 to 45
percent. He states that the average discounts were “often in
excess of 35 percent.” Yet, Dr. Spiro concludes that the basic
liquidity discount for the shares, taking into account the ROFR,
is appropriately set at 15 percent. Dr. Spiro fails to make
clear, in either his primary or rebuttal report, the basis for
his determination that the appropriate liquidity discount is at
the low end of the acceptable range of such discounts. In his
oral testimony, he set forth his theory that there was a
specialized group of purchasers who would value the shares on
other than an investment basis (who would eye Korbel as a
possible future joint venture partner). Dr. Spiro failed to
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