Definition
Minority discount adjusts valuation downward when valuing a non-controlling stake, reflecting the inability to influence corporate decisions. Minority shareholders cannot choose management, set dividends, or decide on asset sales. The discount typically ranges from 15-35% and is applied after determining control value.
functions Formula
Minority Value = Control Value × (1 − Minority Discount)
lightbulb Example
A company's control value is $100/share. A 25% minority discount reduces the fair value of a minority stake to $75/share.
verified_user Key Points
- Reflects lack of decision-making power
- Typically 15-35% of control value
- Greater for companies with concentrated ownership
- Marketability discount may be applied additionally