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Respondent argues that use of the Black-Scholes model will
always result in a blockage and/or SEC rule 144 discount. Mr.
Howard agrees, and so do we. The Black-Scholes model takes into
account, inter alia, a “risk-free interest rate” variable. Mr.
Howard acknowledges in his rebuttal report that "there is always a
cost to locking-in the value of a stock price to protect against
market risk no matter what the specific inputs of the model", and
he testified at trial that it would have taken 5 to 6 months for
ADDI&C to sell its Winn-Dixie stock under the dribble-out method
"without moving the market, [thereby] exposing that stock to
market risks which always results in a decreased value, if for no
other reason than present value purposes." On the instant record,
we are not persuaded by Mr. Howard’s use of the Black-Scholes
model that a blockage and/or SEC rule 144 discount is warranted or
that, even if such a discount were warranted, the amount of any
such discount should be 4.9 percent.
Petitioner has the burden of establishing that a blockage
and/or SEC rule 144 discount should be applied to the NYSE price
on the valuation date of ADDI&C’s Winn-Dixie stock and the amount
of any such discount. Based on our examination of the entire
record before us, we find that petitioner has failed to satisfy
that burden. We further find that on the valuation date the fair
market value of ADDI&C's Winn-Dixie stock was $70,043,204 and the
net asset value of ADDI&C without taking into account any other
discounts or adjustments was $80,140,269.
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