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similar private placement block sales of registered shares. In
contrast, Fuller relied on a study that analyzed 106 private
placement transactions of both restricted and registered shares.
This study concluded that discounts were required by private
placement investors because of information costs that they bore
in investigating the value of shares in the issuing firms as well
as from anticipating "monitoring costs" associated with the
investment (i.e., assistance in the formulation of management
policy and oversight of existing management). He noted that the
sale of restricted shares rather than registered shares in
private placements resulted in a discount of 13.5 percent.
Fuller also used a study being conducted by Business
Valuation Services, Inc. (BVS), his firm, as a "sanity check".
The study analyzed private placement transactions and revealed,
after an analysis of 51 transactions, a mean discount of
16.2 percent. Fuller pointed out that, for private placements of
companies with market capitalizations greater than $50 million,
BVS observed an average discount of 11.1 percent, and, as of the
valuation date, the market capitalization of FOH was
$61.3 million. For companies with annual sales greater than
$100 million, BVS observed an average discount of 7.2 percent,
and, for the 12-month period ended February 27, 1993, FOH had
sales of $125.5 million.
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