Increase the Market Value of Your Privately Held Company by Removing the Lack of Marketability Discount

Certified valuators determine the value of a company by reviewing several risk factors. When their assessment is complete, one of the last questions they ask is if the company that is being valuated is a privately held company, a publicly held company, or if it is a company that shortly will become public or return from being public to become privately held again.

Privately held companies that have no plans in the near future of becoming publicly traded receive what valuators refer to as a “Lack of Marketability Discount.” Over the last 40 years, the average discount valuators have given privately held companies is 30%. This means that a ten million dollar company that is private, on average, would only be valued at seven million dollars.

The reason why valuators make this significant discount is because the purchaser of the company has limited opportunities were he or she to try to sell the company at a later date.  If the company were publicly traded, the buyer could simply sell off a portion or all of his stock in the company to the general public and thereby retake his investment – hopefully at a profit.

Privately held company owners would have to wait for another buyer in order to retake their investment.  The Lack of Marketability Discount protects the buyer from paying full price for a company that he might not be able to sell when and if he ever wanted to sell it.

One way to increase the market value of your privately held company is to go through the processes available to make stock in your company available to the public. Some companies are afraid, unsure about, or opposed at the idea of taking their business public in the traditional markets. Even those business owners that understand the Lack of Marketability Discount are often unwilling to take that step into the public trading realm.

Sometimes cost is a factor. Other times it is all the files and reporting that they dread. Sometimes they fear the traditional markets themselves with the waves of changes in stock prices that are often unrelated to the actual stability and growth of the business itself.

If you are a business owner of a privately held company who would like to remove the Lack of Marketability 

Discount without all the worries of the traditional markets, call the Independent Stock Market today.