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estate’s Reliance shares). Nunes calculates $37,475,695 in gross
sales proceeds on the estate’s 1,800,364 dribble-out shares
(1,800,634 shares times $20.8125). In calculating a discount
under the dribble-out method, Nunes concludes that, in order to
protect against the risk that the price of Reliance stock might
decrease during the extended dribble-out period, a hypothetical
investor would enter into hedging contracts such as “cashless
collars” or “prepaid variable forward contracts,” which hedging
contracts Nunes estimates would cost $1,885,005. From the
$37,475,685 estimated sales proceeds for the estate’s 1,800,364
Reliance shares to be dribbled out, Nunes subtracts the
$1,885,005 estimated cost for the hedging contracts, resulting in
$35,590,680 in net sales proceeds to be realized on the estate’s
1,800,364 dribble-out Reliance shares, reflecting a 5-percent
discount from the valuation date trading value.
Nunes’ 13.9-percent discount applied to the 1,800,363
repurchased shares and the 5-percent discount applied to the
1,800,364 dribble-out shares reflect a combined 9.5-percent
overall discount from the valuation date trading value for all of
the estate’s 3,601,267 Reliance shares.
After reviewing the experts’ reports and the evidence at
trial, we conclude that the hedging contracts used by Range and
Nunes likely would not have been available for a block of stock
such as the estate’s Reliance shares.
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