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Discounts For Lack Of Marketability (DLOM)

Contents

  1. Understanding DLOM: Exploring Valuation Methods
  2. Challenges and Considerations: Navigating DLOM in Valuation
  3. Assessing the Value: Implications for Investors and Stakeholders

Deciphering Discounts for Lack of Marketability (DLOM)

Unlocking the complexities of discounts for lack of marketability (DLOM) and their implications for valuing closely held and restricted shares.

Understanding DLOM: Exploring Valuation Methods

Delve into the intricacies of DLOM and the methodologies used to quantify the discount applied to privately held stock.

Quantifying Marketability:

  • Explore the restricted stock method and its role in assessing the difference between common stock and restricted stock
  • Understand the IPO method and its application in determining DLOM based on pre-IPO and post-IPO share prices
  • Examine the option pricing method and its use of options price and strike price to calculate DLOM

Facts:

  1. Discounts for lack of marketability typically range between 30% to 50%, according to consensus among valuation studies. (source)
  2. Valuation analysts face challenges in assessing noncontrolling, nonmarketable ownership interests in closely held companies, particularly in taxation disputes. (source)
  3. Privately held companies often sell at a discount to their intrinsic value due to increased costs, uncertainty, and longer time horizons associated with selling unconventional securities. (source)

Challenges and Considerations: Navigating DLOM in Valuation

Explore the unique challenges posed by noncontrolling, nonmarketable ownership interests in closely held companies and the guidance provided by the IRS.

Navigating Taxation Disputes:

  • Learn about the challenges valuation analysts face in gift tax, estate tax, income tax, and other taxation disputes
  • Understand the implications of DLOM on valuation outcomes and taxation liabilities
  • Discover the IRS guidance on related issues such as Discount for Lack of Liquidity (DLOL) and Discount for Lack of Control (DLOC)

Assessing the Value: Implications for Investors and Stakeholders

Gain insights into the impact of DLOM on investment decisions, taxation strategies, and financial planning.

Navigating Investment Decisions:

  • Analyze the significance of DLOM in determining the true value of closely held and restricted shares
  • Understand how DLOM influences investment strategies, risk assessments, and portfolio management
  • Explore the implications of DLOM on estate planning, succession planning, and wealth preservation