LiquiStat consists of records of trades that have taken place between investors in the secondary market.
For each transaction, we have collected information, including deal documents, on the buyers and sellers of the securities, the nature, rights, preferences, and privileges of the securities, restrictions on resale inherent in the securities, and data on the issuer’s financial condition, among other factors.
The goal is, for each transaction, to discover, determine, and analyze the factors that were considered by the buyer and seller when making the decision to trade. These factors, then, represents the main drivers of value of the securities sold.
LiquiStat contains hundreds of transactions in restricted stock since 2004. These transactions have taken place at discounts from the market value of the otherwise-equal but fully-liquid shares of the same issuer.
Restricted stock sells at a discount due to the illiquidity of the shares. LiquiStat contains a wealth of information on each transaction and each issuer. We use this information to value restricted stock, but also as a way to determine and support illiquidity discounts for other illiquid equity securities.
LiquiStat also has a unique application to business valuations and valuations of limited partner interests in holding companies, such as FLPs and LLCs. When determining discounts for lack of marketability (DLOM), or illiquidity discounts, appraisers typically look at restricted stock private placements. But in these transactions, insiders are selling shares to outsiders (issuers to investors). For this reason, many analysts consider private placement discounts to be driven by factors other than illiquidity, for example, information asymmetry.
This problem does not apply to LiquiStat, which represents investors selling to other investors, with no involvement of the issuer and no new money being raised by the issuer. This makes our LiquiStat-based analysis completely unique. For more detail, see the white paper below: