What’s the difference?
They’re one in the same to me. I must be missing something here…
they’re different, but the end result is pretty similar. liquidity- you could have a stock listed on an exchange that trades very thinly. let’s say over time you’ve accumulated some massive position in it. you want to get out of it. if the thing trades really illiquid, you’ll have to take a pretty big discount to dump your shares off (we could make it dramatic and say it’s a huge market order… you’d get crushed). marketability- imagine you have some private placement or i dunno, piece of rare artwork or something that doesn’t even trade on a market maybe. to get that thing sold, you need to find a market for it. marketability discount is that discount you need to take to get your thing sold b/c there’s really not a great market out there for it. so yeah, the 2 have a similar feel. just a little bit different.
I think there is a very small difference. Liquidity: if you were trying to get rid of a huge load of securities - you need to give a discount to offload that entire load. Marketability: if you are trying to sell something that is “really” not sellable - you need to give a marketability discount. Of course - something that is non-marketable may also be non-liquid. and vice versa.
no. there are 3 types of discounts/premiums. premium for control: do shareholders have the ability to influence decisions? discounts for lack of marketability: if youre nonpublicly traded, your company is valued at a discount discounts for lack of liquidity: it may take longer than youd like for the stock to be sold. this can be due to a lack of marketabilty, but its not the same thing. lack of liquidty can also be due to the size of the position.
I always think of these two in terms of decent house in a suburban neighborhood (may not apply as of late though): The house is certainly marketable in that there is a market for houses and the house can be sold, but is it liquid, most likely not (i.e. you can’t convert it into cash quickly without reducing price substantially)