Discounts For Lack of Marketability (DLOM) is a method used to help calculate the value of closely held and restricted shares. The discount is typically applied when there is a lack of liquidity in the market for these types of shares. This can be due to factors such as illiquidity, size or type of company, or other restrictions on transfer. The discount helps to reflect the fact that these shares are not as easily traded as those that are more widely available.There are various methods used to calculate DLOM, and each has its own strengths and weaknesses. One popular approach is the Black-Scholes model, which uses stock price volatility and other factors to estimate how much less these shares are worth than those that are more freely traded. Other methods may take into account things like interest rates, dividends paid by the company, or even expected future changes in share price.The amount of the discount will vary depending on individual circumstances. It can be helpful for business owners who want to sell their closely held stock, or for investors who want to purchase it at a lower price than would be available on an open market.
