1302008 Informal Interpretation

Verne, B. Michael
From :
Sent:
To:
Thursday, February 21. 2013 3:08 PM
Ve rne, B. Michael; Wals h, Kathryn
Subject: 	RE: SOT - Stock Question
M ike,
Thanks. Just to play this ou t, if the st ock price increases in t# 3, so t hat the l ow es t closing price in the 4 5 days prior t o t he
ac qui sit ion is $150 per sh are, so t hat value of t he stock held pr i or to the acquisition is $ 150M and already exceeds the
$100 million (as adjusted) threshold, assuming that it is permissible calculate the price based on the 45 days pri or to th e
acquisi tio n. If th at is the case, X could lo ck in the 5-yea r grace period by acquiring a single share of stock.
Do I have this right?
From : Verne, B. Michael [mai l to: MVER NE@ftc.gov]
Sen~eb r uary 21, 2013 2:49 PM
To:-Walsh, Kathryn
SubJect: RE: SOT- Stock Quest io n
-you use the 45 days prior to the 803.5(a) notice fo r the stock acquired during the year following
notification as well as the stock already held. 	The whole point of calculating it prior to fi li ng is to lock
in a value. 	So the value of the stock held after the acquisition during the first year would be 2.5 MM x
$70 =$175''MM, exceeding the $100 million {as adjusted) thresho ld and allowi ng additional
acquisitions up to the $500 million (as adjusted) threshold during the 5 year period. The language
you reference in #3 of using either the 45 day period prior to the notice or the 45 day period prior to
the acquisition is laying out how you value the stock if it is reportable (45 days prior to the notice) or
non-reportable (45 days prior to the acquisition) .
From:
Sent:
To: Verne, B. Michael; Wa lsh, Kathryn
Subject: SOT - Stock Question
Mike and l<ate:
Thanks, as al ways, for addressing th ese questions. Here is a situation I want to run by you.
1. 	Natura l person, X, files an HSR on January 1. X already holds 1,000,000 shares of stock with a current market
price of $70 per share. (Ma rke t price being calculated by the low est price in the 45 days before the 803.5(a)
no ti ce is sent).
2. 	X intends to acquire an additio nal l, SOO,OOO in addi tio nal shares in t he 12 months fo ll owi ng expiratio n of the
HSR waiting period. So at the "market pr ice" ca lcu lated o ff th e 803.5(a} notice, X will exceed t he $100 m illion,
as ad j usted, threshold. 	X files at that higher threshold.
1

• 	3. 	X, in fa ct, acquires the 1,500,000 shares in the 12 months following the expiration of the HSR waiting
period. 	However, t he " market price" of the stock dropped to $35 per share, as measured by the lowest closing
price in the 45 days prior to t he acquisition.
It seems to me that, under 801.10(c)(1), to calculate the "market price" for the stock held and acq uired in { 3) , we can
use either the lowest closing bid price in the 45 days prior to the acquisit ion, or the lowest cl os ing bid price in the 45
days prior to the 803.S(a) notice. Do I have th is right? Th is is impo rt an t to determine whet her t he $100 million was
exceeded in the 12 months following t he term ination of th e wait ing period, so the 5 yea r grace period is loc ke d in.
It wou ld ce rt ainly seem unfair if the person were denied the benefit of the 5 year period by a facts beyond his
control. {Both the st ock price and t he tim i ng of the purchases, wh ich are subject to restriction by the SEC).
Thanks,
Please consider t he envi ronment before pr i nting this em ail.
This email message and any attachments are being sen t
t he intended r[)Cipicnt, please notify us immediately-by
copies of this message and any attachments. Thank you.
For more information
2
are con fi dential, and may be privileged. If you are not
ng an email to--and d estroy all

In a transaction where you filed using the market price determined
by the 45 days prior to the notice, the market price at any point
beyond the end of the waiting period is irrelevant. 	You have
already locked it in with the filing.