ESOP Valuation
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All assets held by an ESOP, including employer securities, must be valued at least once a year on a specified date, generally the last day of the plan year. The factors that an independent appraiser will consider at the appraised value of non-publicly traded securities are:
(i) The nature of the business and the history of the enterprise. (ii) The economic outlook in general and the condition and outlook of the specific industry. (iii) The book value of the stock and the financial condition of the company. (iv) The historical earnings and future earnings capacity of the company. (v) The dividend-paying capacity of the company. (vi) Whether or not the enterprise has goodwill or other intangible value. (vii) Recent sales of the stock and the size of the block sold. (viii) The market price of stock of publicly traded corporations engaged in the same or similar lines of business. (ix) The marketability of, or lack of a market for the securities. Even if there is no public market for stock purchased by an ESOP, the employer must make a market during specified periods of time by providing "put rights" to former ESOP participants and their beneficiaries. This repurchase obligation may reduce or eliminate the discount for lack of marketability. If "put" rights are taken into account in reducing the discount for lack of marketability, the appraiser will consider the extent to which such rights are enforceable, as well as the company's ability to meet its future obligations to repurchase the stock. |