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restricted stock studies.10 Mr. Schroeder also used information
from initial public offering (IPO) studies.11
a. The Estate’s Expert
In determining an appropriate lack of marketability
discount, Mr. Schroeder relied on restricted stock studies that
indicated discounts ranging from 31.2 to 45 percent and an
overall average discount of 34.9 percent. He also relied on IPO
studies that indicated an average lack of marketability discount
ranging from 43 to 45.7 percent and an overall average discount
of 44.4 percent. After considering certain factors influencing
the marketability of RBI shares, Mr. Schroeder concluded that the
factors supporting a higher discount would slightly outweigh the
factors supporting a lower discount, and he selected a discount
of 40 percent.
Mr. Schroeder considered the potential impairment of the
loan to the Havrillas and the pending bankruptcy of
10 Restricted stock studies compare private-market prices of
unregistered (restricted) shares in public companies with the
public-market prices of unrestricted but otherwise identical
shares in the same corporations. See McCord v. Commissioner, 120
T.C. 358, 387-388 (2003). Historically, restricted shares
generally could not be resold in the public market for 2 years.
See 17 C.F.R. sec. 230.144(d)(1) (1996). In 1997, the required
holding period was shortened to 1 year. See 62 Fed. Reg. 9242
(Feb. 28, 1997).
11 Initial public offering (IPO) studies compare the
private-market price of shares sold before a company goes public
with the public-market price obtained in the IPO of the shares or
shortly thereafter. See McCord v. Commissioner, supra at 387.
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