- CFA Exams
- CFA Level I Exam
- Study Session 11. Equity Valuation (3)
- Reading 31. Private Company Valuation
- Subject 1. Private and public company valuation: similarities and contrasts
CFA Practice Question
Why is stock in private companies generally less liquid than otherwise similar interests in public companies?
II. Shares of a private company have not been registered for sale in the public stock markets.
III. There is limited number of existing and potential buyers.
I. Private companies typically have fewer shareholders.
II. Shares of a private company have not been registered for sale in the public stock markets.
III. There is limited number of existing and potential buyers.
A. I and II
B. II and III
C. I, II and III
Explanation: This is a negative factor in private company valuations.
User Contributed Comments 2
| User | Comment |
|---|---|
| LyncKidd | Uber has no shortage of want-to-be investors. |
| DevanCFA | I would argue that buyers exist, they are just less accessible. Point III doesn’t seem right to me. |