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3. Mr. Frazier’s Restricted Stock Analysis
Mr. Frazier reviews four studies under the restricted stock
approach34 and then attempts to infer an appropriate
marketability discount by “placing” MIL within the range of
observed discounts in those studies and the Willamette studies,
on the basis of certain characteristics of MIL (revenue, income,
and NAV) and the gifted interest (size of the interest, expressed
both as a percentage of MIL and as a dollar amount). The results
of that attempt are set forth in Table 31 of the report
constituting Mr. Frazier’s direct testimony (Table 31). Based on
data from the five studies, Mr. Frazier identifies 10
hypothetical discount levels for the gifted interest (some
expressed as a specific percentage, e.g., “33.6%”, and some
expressed as being greater or less than a specific percentage,
e.g., “>35%”). Six of the hypothetical discounts were greater
than 35 percent and four were less than 35 percent. He states:
34 Mr. Frazier reviews the following studies (the
restricted stock studies):
1. Securities and Exchange Commission, Discounts Involved
in Purchases of Common Stock (1966-1969), H.R. Doc. No. 64,
Part 5, at 2444-2456 (1971).
2. Silber, “Discounts on Restricted Stock: The Impact of
Illiquidity on Stock Prices,” Financial Analysts Journal,
July-August 1991, at 60.
3. A study only described as “The Standard Research
Consultants (SRC) Study”.
4. Hertzel & Smith, “Market Discounts and Shareholder Gains
for Placing Equity Privately,” 48 J. Fin. 459 (1993).
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