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Kimball focused on the following methods of disposition to
determine the fair market value of the minority blocks of FOH
stock: (1) "Synthetic" put option analysis, (2) public secondary
offering, and (3) private placement analysis. Kimball explained
that the holder of a significant block of shares, such as the FOH
block, would be exposed to significant risks when attempting to
dispose of the shares in the public market. According to
Kimball, the blocks may represent several weeks or months of
trading volume, exposing the seller to fluctuations in the market
stock price. He explained that a method of eliminating such risk
is to buy put option contracts granting the seller the right to
sell the shares at a fixed price over a predetermined period.
Hence, for a price, the seller would eliminate the risk of
downward stock price movement over the disposition period. This
approach is called a synthetic option analysis because FOH stock
had no actual public market for any options or warrants in
existence on the valuation date. Kimball estimated the expense
necessary to enter into such options for blocks of FOH stock
using several econometrics and theoretic option pricing models,
including the Black-Scholes model, the Noreen-Wolfson model, and
the Shelton model. He settled on $4.50 per share, a discount of
roughly 35 percent, as the most appropriate value. In coming to
his conclusion, Kimball indicated that he placed more weight on
the Shelton model because of his greater confidence in the
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