How to Determine a Discount for Lack of Marketability (DLOM) by Ayush Baheti, CFA, CMA

What Does Discounts For Lack Of Marketability Mean?

Discounts for lack of marketability (DLOM) refer to the method used to help calculate the value of closely held and restricted shares. The theory behind DLOM is that a valuation discount exists between a stock that is publicly traded and thus has a market, and the market for privately held stock, which often has little if any marketplace.

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.