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Definition: Discount for Lack of Voting Rights
A company has stocks with voting rights and stocks with limited or no voting rights. Discounts are provided for the stocks with no voting rights. Thus, the total stock multiplied by price per share would not be equal to total equity of the firm
Discount for lack of voting rights: It is the fixed proportion or percent deducted from the share price owing to their non-voting rights.
Non-Voting Stock Valuation: Estimate the value of firm’s voting stock and apply Discount for lack of voting rights (DLVR). For most of the public traded companies, the price differential generally falls in the 3% to 5% range.
It is used in equity allocation methods used by the valuation analysts to allocate the total equity value of a company between the voting stock and the non-voting stock.
- This is a good option practiced by the firms who want to pool in the funds without losing control over the decision making processes.
- Shareholders, who are interested in higher dividends rather than participation in decision-making, prefer the differential voting rights option.