- 36 -
determine a price earnings multiple for Savings is akin to a
navigator averaging compass points chosen at random to plot a
course. We reject this part of Spiro's opinion, because the data
he used does not support his conclusion.
We reject Spiro's reliance on the restricted sales and IPO
studies for the same reasons we have already expressed in
addressing the opinion of petitioner's expert.
We do not agree with the implied share value that Spiro
obtained using his piecemeal sales method. To calculate this
value, Spiro assumed that a lender would make the same
assumptions as he did regarding the future values of the shares,
the amount of the dividends, and the number of shares that could
be sold per year, and that the lender would make a loan equal to
100 percent of the present value of the future cash-flow, which
would be secured in total only by the shares.
We think that a lender would require the entire block of
stock as security for a loan equal to only a part of the stock's
value;19 therefore, a loan for the total amount of the value of
18(...continued)
support his premise that the price-to-earnings ratio is
principally influenced by earnings growth, or that knowledge of a
company's net income growth trend helps to predict its price-to-
earnings ratio. See Freund & Smith, Statistics: A First Course,
441 (4th ed. 1986); Kroeber & LaForge, The Manager's Guide to
Statistics and Quantitative Methods, 147-148 (1980).
19Spiro conceded at trial that the stock would not secure
(continued...)
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