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b. Respondent’s Expert
Using the private placement approach, Dr. Widmer determined
a 15-percent discount for lack of marketability on the basis of a
study by Dr. Mukesh Bajaj, Bajaj, et al., “Firm Value and
Marketability Discounts”, 27 J. Corp. L. 89 (2001), which found
that the private placement of unregistered shares has an average
discount of about 14.09 percent higher than the average discount
on registered placements. Dr. Widmer also based this discount on
the low risk of the partnership’s portfolio.
3. Conclusion
We are not persuaded by ATI’s recommendation of a 38-percent
marketability discount as the restricted stock studies referred
to in ATI’s expert report examine mostly operating companies, and
there are fundamental differences between an investment company
holding easily valued and liquid assets (cash and certificates of
deposit), such as KLLP, and operating companies. See Peracchio
v. Commissioner, supra. Moreover, ATI did not analyze the data
from these studies as they related to the transferred interests
herein, and therefore we cannot accept the premise that this
average discount is appropriate. See id.
We are also not persuaded by Dr. Widmer’s recommendation of
a 15-percent marketability discount. While we agree that the
Bajaj study is an appropriate tool in determining the lack of
marketability discount, Dr. Widmer’s conclusion based on the
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