DLOM
Discount for Lack of Marketability — the percentage reduction applied to a private-company equity's "marketable-equivalent" value to reflect the cost of NOT being able to sell the shares freely in a public market. Empirical evidence supports a 20-40% range for typical mid-size private companies, with the load-bearing inputs being expected holding period, cash-flow / dividend visibility, and put-right or other liquidity-mechanism presence. The discount narrows dramatically when contractual liquidity rights are present (put options, redemption rights, tag-along rights) and widens when no exit path is defined.
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Related terms
Ambiguity Aversion · Anchored Assumption · Asset Beta · Bank ROE Spread · Banker Pitch Deck · Beta
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