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placement of the stock, or (3) a periodic sale subject to volume
restrictions under SEC rule 144. With respect to the registered
secondary offering, Fuller testified that a discount between
10 and 13 percent was warranted. He also testified that, under a
periodic sale subject to SEC rule 144, the minority interests in
FOH should be discounted between 13 and 17 percent. However,
Fuller ultimately dismissed these options concluding that none
were viable and that the private placement analysis was the
exclusive means by which to value the blocks of FOH stock.
Specifically, Fuller testified that a secondary offering was not
feasible because it would require the consent of FOH management.
Likewise, he concluded that it would take 7 years to liquidate
the stock under the periodic sales method, rendering that means
of disposition inadequate.
Instead, he concluded that a private placement was the
likely means of disposition. In calculating the discount for a
private placement of FOH stock, Fuller indicated that holding
period restrictions were the primary reason for the discount. To
ascertain the applicable discount, Fuller reviewed several
restricted stock studies on private placement transactions.
Fuller recognized that the combined results of these studies
indicated a 35-percent marketability discount. He, however,
concluded that the studies suffer because they review only
restricted share transactions and do not include a sample of
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