II. LEVELS OF VALUE
1. Control Value-This value represents the value of the enterprise as a whole. As such, the valuation of the entity at this level should encompass the various rights and privileges, as well as the risks, that accompany having a controlling interest in the business. This is also referred to as a marketable, control basis value. At this level, theoretically, valuation discounts typically are not applied.
2. Marketable Minority Interest Value-This is the value of a less than fifty percent (50%) interest in an enterprise that has access to an open market. The most obvious example of marketable minority interest values are the published share prices of publicly traded stocks. These marketable minority interest values of publicly traded stocks are often utilized to determine the hypothetical marketable minority interest values for closely held interests.
3. Nonmarketable Minority Interest Value-This level of value considers the lower marketability that is associated with a given shareholding for a variety of reasons. With regard to closely held stocks, these marketability factors that diminish value primarily reflect the obvious lack of a public marketplace that faces a closely held stock. With regard to publicly traded shares, the marketability factors that are most frequently reflective of valuation discounts include: a) stock restrictions imposed contractually upon a shareholder, b) the absence or restriction of registration rights to require the purchase or sale of the shares at the stockholder’s will, and c) financial issues, including the size of the block of stock held by the shareholder, which may impair the liquidity of the shares on a short term basis.