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the gifted interest as a 1-percent interest in MIL.36 In light
of those numerous defects, we give little weight to Mr. Frazier’s
restricted stock analysis.
4. Dr. Bajaj’s Private Placement Analysis
a. Comparison of Registered and Unregistered Private
Placements
Dr. Bajaj believes that the discounts observed in restricted
stock studies are attributable in part to factors other than
impaired marketability.37 In support of his position, Dr. Bajaj
analyzes data from studies (including his own unpublished
study)38 involving both registered private placements and
unregistered private placements (the private placement studies).
He observes that, if discounts found in unregistered (restricted)
private placements are attributable solely to impaired
marketability, then there should be no discounts associated with
36 Specifically, one restricted stock study, the Silber
study, found that the average dollar size of private placements
with discounts in excess of 35 percent was $2.7 million, while
the average dollar size of private placements with discounts less
than 35 percent was $5.8 million. Even taking into account Mr.
Frazier’s suggested minority interest discount of 22 percent, the
“dollar size” of each half of the gifted interest was
approximately $5.7 million. That would indicate that, based on
the Silber study, a discount of less than 35 percent would be
appropriate for each half of the gifted interest.
37 We note that such other factors should not include the
purchaser’s minority ownership position, if applicable;
presumably, a minority interest discount is already reflected in
the market price of a share of the issuer.
38 Other than his own study, he refers to the Wruck study,
supra note 30, and the Hertzel & Smith study, supra note 34.
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