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With respect to the put options used by Range in his
dribble-out analysis, we believe the testimony of Kimball that an
active market did not exist for put options on the estate’s
Reliance shares. In order for the estate to purchase put options
on its Reliance shares, the estate would have to find a party
willing to write nonstandard, nontraded put options. Even if a
writer of put options on Reliance stock could be found, the
writer would require a substantial premium due to the inability
to unwind its position by purchasing opposite call options in the
open market and due to other associated market risks.
With respect to the hedging contracts used by Nunes in his
dribble-out analysis, we believe the testimony of both Range and
Kimball that a market for such hedging contracts relating to the
estate’s Reliance shares did not exist. Cashless collars and
prepaid variable forward contracts generally are used with blocks
of stock that are highly liquid and marketable. Due to the size
of the estate’s block of Reliance shares in relation to the
outstanding Reliance shares and the SEC Rule 144 restrictions,
the estate’s Reliance shares lacked liquidity and marketability.
Because we do not agree with either Range’s or Nunes’ use of
hedging contracts and because Kimball’s approach appears to be a
reasonable and generally accepted method, we adopt Kimball’s
dribble-out methodology.
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