How Courts Value Privately Traded Stock
How do Tennessee courts value corporate shares that are not traded on a national stock exchange? In Blasingame v. American Materials, the Tennessee Supreme Court adopted the Delaware Block Method for use in such situations. 654 S.W.2d 659, 667 (Tenn. 1983). This method allows the court to take a weighted average of the market price, the asset value, and the the earnings value of the corporation. The weight given to the particular values takes into consideration the type of business, the objective of the corporation, and other factors relevant to the ongoing value of the corporation. Subsequent Tennessee cases have found that the block method may also be appropriate for use in valuing preferred stock. See e.g. Genesco, Inc. v. Scolaro, 871 S.W.2d 487 (Tenn. Ct. App. 1993).