define discounts for lack of marketability - dLOM, please

define discounts for lack of marketability - dLOM, please
Posted 25 February, 2009 by Carlo Rohan Ware from Tampere
my name is Carlo from Tampere. I'm new at all this forex trading milieu, and i ran into a term i can't compass: what does discounts for lack of marketability - dLOM mean?
Leverage Master Answers:
that is an important term to make out. Discounts for lack of marketability - dLOM is A method used to help calculate the value of closely held and restricted shares. Theory behind DLOM is that a discount exists between the value of a company's stock that is and is not marketable. Various methods have been used to quantify the discount that can be applied including the restricted stock method, IPO method and the option pricing method. The restricted stock method purports that the only difference between a company's common stock and its restricted stock is the lack of marketability of the restricted stock. Subsequently, the price difference between both units should arise due to this lack of marketability. The IPO method relates to the price difference between shares that are sold pre-IPO and post-IPO. The percent difference between the two prices is considered the DLOM using this method. The option pricing method uses the option's price and the strike price of the option as the determinants of the DLOM. The option price as a percentage of the strike price is considered the DLOM under this method. The consensus of many studies suggests that the DLOM ranges between 30-50%.
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