Real case of a valuation fraud from an expert. Some advice needed.
Hi guys. This is a real case and there is a trial going on (in eastern Europe ), I would like some hints from you and maybe even some help based on International valuation standards.
There are 2 companies:
Company A has 21 mil cash in bank, that's all the assets.
Company B has a hotel, a pool, some other PP&E and cash, very very low debt.
Majority shareholders wanted for companies to go private. Some minority shareholders didn't want so they decided to get out. Now a valuation expert was employed to repay the minority shareholders whatever their equity was worth (that is a requirement from the law).
Now the expert valued the companies using DCF and because both of them have low or almost none activity their value that was calculated was like half of their net assets.
Expert also said that he used 1/PER as a discount rate (according to him this is used for publicly traded companies, whatever).
Also he said that there are some closed end funds here in eastern europe, which are traded and have a market cap lower than their net assets.
What counter arguments can I use to show that he is full of it and his valuation method are not objective?
Or maybe I am wrong and let me know about that too.
I will appreciate any of your inputs, thanks.