Discounts For Lack Of Marketability Calculator - DLOM Calculator

All businesses can be divided into two main groups - private companies and public companies. Public companies are companies whose shares are traded on the stock exchange, while private companies are companies whose shares are held by private individuals. Therefore, their shares are not traded on the stock exchange.

Since the shares of private companies cannot be traded on the stock exchange, the demand for shares will probably be lower. Like any property, if there is no demand for the property, its price should decrease. The question is, how much should it be reduced? The answer can be found using - Discounts For Lack Of Marketability (DLOM).

The idea behind the method is very logical. You have a property you want to sell. The longer it takes to sell it, the more willing you will be to compromise and lower the price. Therefore, the method tries to estimate how much you would be willing to lower the price.

To estimate how much you would be willing to reduce the price - you can adopt different financing models. In finance, there is a financial asset known as a put option.

A put option is a security that allows you to sell specific property in a year at a price determined today.

For example, if you want to sell a share of Company X in a year for $100, you can buy a put option on the stock with an exercise price of $100.

It doesn't matter what the share price will be in a year - when you hold the option, you will be able to sell the share for $100. Even if the share price is $50 and even $200 - you can buy the share for $100.

All you have to do is buy a put option with some price.

For example, we have a company whose value is 1 million dollars. We want to sell the company. That is why we are purchasing an imaginary put option, allowing us to sell the company in the coming year. The price of the option is $200,000. Therefore we conclude that the value of the private company in our hands is 800,000 dollars: 1,000,000 - 200,000.

Discounts For Lack Of Marketability Calculator - DLOM Calculator

With Equitest, you can calculate the DLOM using the Discounts For Lack Of Marketability Calculator - DLOM Calculator. Our business valuation software includes a Discounts For Lack Of Marketability Calculator - DLOM Calculator that can be used without any problem.

Infographic: Discounts For Lack Of Marketability Calculator - DLOM Calculator

(If you like - you can use it, but you should add a link to Equitest's site)

How can you calculate the DLOM using Equitest?

To calculate the DLOM you can use Equitest. The calculation is done in three simple steps:

1. Choose the Country.

2. Choose the industry.

3. Click the button.

(To unmute the video clip, click the video)

Conclusion

In this article, we have discussed the Discounts For Lack Of Marketability Calculator - DLOM Calculator. Suppose you look for a straightforward way to evaluate your business, manage your cap table, or create a pitch deck. In that case, you can try our intuitive ai based business valuation software or our business valuation calculator, or you can contact us for free advice or schedule a demo.