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closely-held entity go well beyond the narrowly defined
‘liquidity costs’ Dr. Bajaj has isolated in his analysis” and
that “the [marketability] discount is caused not by just
‘liquidity’ but the other negative characteristics that attend
securities issued by small closely-held entities.”
Dr. Bajaj has indeed been helpful in focusing our attention
(and Mr. Frazier’s attention) on the distinction between
illiquidity and other factors (e.g., assessment and monitoring
costs) that contribute to private placement discounts. However,
his apparent confusion regarding the nature of the discount for
lack of marketability (i.e., whether such discount can be
explained purely in terms of illiquidity or whether other factors
may be involved) is troubling. In his direct testimony, Dr.
Bajaj is fairly clear that assessment and monitoring costs
associated with private placements are outside the realm of the
marketability discount. In his rebuttal testimony, however, he
indicates that such costs may contribute to the marketability
discount for a closely held entity. That leads us to question
whether other “negative characteristics” (in the words of
Mr. Frazier) associated with closely held entities may contribute
to the appropriate marketability discount for an assignee
interest in MIL. Therefore, while we are impressed by portions
of Dr. Bajaj’s analysis, he has not convinced us that the
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