In Global GT LP and Global GT LTD v. Golden Telecom, Inc. the valuation decision was hinged upon the methodology used to develop two key inputs in developing cost of capital estimates: the beta and the equity risk premium (ERP).
Certainly, the Court's findings shed important insights into a beta's proper derivation (in this case, at least), by focusing on whether a traditional 60-month historical beta or, alternatively, an adjusted (a.k.a. "forward-looking") beta is more pertinent to the valuation. However, the ramifications of the Court's failure to adopt the Morningstar/Ibbotson "historical" equity risk premium and instead opting for a significantly lower estimate is far more consequential.
The Court's decision on ERP is consistent with the position that Duff & Phelps has advocated for several years. In fact, the Court cited the work published by Duff & Phelps' Managing Director, Roger Grabowski, and Dr. Shannon Pratt on a number of occasions. Duff & Phelps incorporates its latest analysis of academic and professional research on the topic of ERP in its annual Duff & Phelps Risk Premium report.