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Should Substantial Discounts Apply to Very Short Holding Periods?Should Substantial Discounts Apply to Very Short Holding Periods?
What factors impact marketability discounts in restricted stock transactions? Typically, an investor's expected holding period is the primary determinant of the size of the marketability discount. But the regulations governing restricted stock have eased significantly since 1990. Effective Feb. 15, 2008, the minimum holding period was reduced from one year to six months. Our firm, Stout Risius Ross
Aaron M. Stumpf
What factors impact marketability discounts in restricted stock transactions? Typically, an investor's expected holding period is the primary determinant of the size of the marketability discount. But the regulations governing restricted stock have eased significantly since 1990. Effective Feb. 15, 2008, the minimum holding period was reduced from one year to six months. Our firm, Stout Risius Ross (SRR) studied this shorter holding period to quantify how this change impacts discounts as well as to analyze the effect of certain company-specific factors on discounts.
We think that a discount study involving short holding periods is useful in the context of valuing closely held minority interests in which a liquidity event is...
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