Illiquidity discount
A potential valuation adjustment for limited marketability or restrictions on selling an interest. Its applicability and size depend on the facts; it does not imply that every private stake is worth less than every public comparison.
Illiquidity discount in round numbers
Hypothetical, at one valuation date in US$ millions: the same equity interest has an assumed marketable-basis value of 100. An assumed 20% marketability discount gives 80; an assumed 25% discount gives 75. These are illustrative assumptions, not a market-standard range, and other rights and business-risk assumptions are held constant.
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| Marketable-basis value | Assumed discount | Adjusted value |
|---|---|---|
| 100 | 20% | 100 × (1 − 20%) = 80 |
| 100 | 25% | 100 × (1 − 25%) = 75 |
Terms Related to Illiquidity discount
Fair market value · Private credit · Secondaries · Venture secondaries · Mutual fund / ETF · All of the glossary