This is the sixth post in a “deja vu” series focusing on the handful of famous restricted stock studies published by the mid-1990s based on transactions occurring through the 1980s. The post provides a convenient reference to each of the prior posts for reader convenience. This post addresses the Silber Study, the most transparent of all the early studies, and provides some very interesting insights.
In this “deja vu” series about the “old and tired” restricted stock studies, we are working our way through the leading early studies. We have already examined the SEC Institutional Investor Study, the Gelman Study, the Trout Study, and the Moroney Study. In this post, we examine the Maher Study. The story does not get better with repetition. So read on.
This is the fourth post in a series on the historical restricted stock studies that appraisers have referenced for many years and is a review of the Moroney Restricted Stock Study. The first three posts in the series addressing can be viewed: 1) SEC Rule 14 pre-April 1997, 2) the SEC Institutional Investor Study, and 3) the Gelman Study and the Trout Study. Moroney’s central finding was that the Tax Court had embraced the concept of marketability discounts, but had been reluctant to grant discounts commensurate with their economic reality in the marketplace.
In the first post in this Deja Vu series, we discussed the Securities and Exchange Commission’s Rule 144 from a layman’s perspective as of pre-April 1997, when the mandatory period of restriction was lowered from two years to one year. The second post reviewed the SEC Institutional Investor Study, which was published in 1969. This third post reviews two more of the early restricted stock studies: the Gelman Study and the Trout Study.
Deja vu is a feeling of already having experienced a present situation. In my initial review of “Valuing a Business, Sixth Edition” (VAB6) by Shannon Pratt/American Society of Appraisers I was reminded that I had reviewed a significant number of the studies summarized in its Chapter 19 back in 1997, when my book, Quantifying Marketability Discounts, was published. In this and a few future posts, I’ll share what I believe is the most complete analysis of the historical restricted stock studies that are still relied upon by many business appraisers.
The levels of value chart is one of the most important descriptive figures for business valuation. In a previous post, we gave names to the “spaces” on this chart, which are familiar valuation discounts and premiums used by business appraisers. This post focuses on why those “spaces” exist and the economic factors that create the familiar discounts and premiums.
This post recalls an appraisal review assignment of mine from many years ago. After the last seven posts where we have talked specifically about appraisal review from a broad perspective, it is appropriate to discuss one specific case where appraisal review was key to arriving at a settlement to a bitterly fought buy-sell agreement dispute.
The genesis of what we now call the Integrated Theory of Business Valuation was my 1997 book, Quantifying Marketability Discounts. That book introduced the Quantitative Marketability Discount Model (QMDM) to the business appraisal profession and focused on shareholder level cash flows. The QMDM was, and is, a shareholder-level discounted cash flow model. In my 2004 book, The Integrated Theory of Business Valuation, we focused the integrated theory on valuation at both the enterprise and shareholder levels of value. Then in 2007, we released Business Valuation: An Integrated Theory, Second Edition and the third edition was released in 2021. It’s evident that the integrated theory has been around now for many years. In this week’s post, we begin to relate the integrated theory to the standard of value known as fair market value.