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marketability. Cotler indicated that the discount is most
sensitive to block size. For example, a block of stock that
represented 39 percent of the outstanding shares averaged a
38.7-percent discount. Cotler further testified that, in order
to value properly the FOH stock, there must be a thorough
analysis of FOH's operations, the markets it serves, and the
characteristics of the FOH stock held by the trusts.
Cotler expressed an opinion that, at the valuation date, FOH
was experiencing an accelerating negative financial performance.
Cotler also noted that a large factor influencing the negative
results of FOH could be related to the U.S. economy and the
recession in California at the valuation date. Cotler also
testified that consumer confidence was dropping in the fourth
quarter of 1992 and that the retail sector was anticipating a
difficult year with continued discounting of merchandise likely
in order for retailers to maintain sales levels.
Cotler opined that the declining interest in FOH common
stock was likely attributable to a number of factors, the most
significant being the continuing decline in FOH's operating
performance and the low expectations of a near-term turnaround.
From an analysis of the common stock trading patterns, he
concluded that there was a relatively low level of investor
interest in FOH, and selling a large block of FOH common stock
would be very difficult. Cotler further observed that the FOH
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