- 32 -
volatile nature of Mr. Conklin's valuation model, along
with the lack of objective support for his assumptions,
causes us concern about the accuracy of his final
calculation.
We are also not persuaded by petitioners' argument
that the $60.98 price per share established in the
original acquisition transaction and used in connection
with the Share Compensation Plan supports the accuracy of
petitioners' expert's valuation. In consideration for
their shares in old SWI, Dubin Clark gave Messrs.
Jacobson and Henochowicz $5 million in cash, the right
to contingent payments of 30 percent of the company's
operating profit in excess of $4 million for the next 5
years, and the right to purchase approximately 27 percent
of the stock of new SWI for $60.98 per share. We agree
with respondent that this price per share does not
accurately reflect the fair market value of the stock
after the acquisition transaction. Indeed, as mentioned
above, the $60.98 price for the new SWI shares was
computed by dividing paid-in capital as of January 31,
1989, $439,056, by the number of shares of new SWI stock
outstanding at that time, 7,200. It bears no necessary
correlation to the value of the SWI stock after the
acquisition transaction. Furthermore, there is no
evidence that it was intended to reflect the value of the
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