8301014 Informal Interpretation

Date:
Rule:
801.10; 801.13
Staff:
Many Ann Dunaitis

Question

(redacted)

January 31, 1983
Mary Ann Dunaitis, Esq.
Premerger Notification Office
Federal Trade Commission
Washington, D.C. 20580

Dear Ms. Dunaitis:

This will confirm our telephone conversation of

January 26, 1983, in which we discussed the proper valuation

of securities purchased in stock-exchange transactions.

I related to you the following hypothetical facts:

A person meeting the size of person criteria purchases

securities in company X beginning on December 1, 1982. By

January 26, 1983 he has purchased 500,000 shares. During the

45-day period prior to January 26, 1983 the stocks lowest

closing quotation was $20 (occurring on December 20). The

stock now sells for $30. As of January 26, the acquiring

person may purchase up to 166,666 shares, since the stock

previously held is valued at $10 million and the stated

number of shares, at $30 each, is less than $5 million.

This, the $15 million threshold would not be crossed.1 As of

January 27, however, additional shares may be purchased, the

acquiring person would hold 666,666 shares, all of which

would be valued at $20, and could purchase another $1,666,679

of stock (valued at $30, assuming price held a steady). This

process of purchasing and revaluing may continue until the

$15 million or 15% threshold is crossed.

_______________________-

1. We assume throughout that the 15% threshold will not be

crossed.

You confirmed the correctness of this interpre-

tation of Rules 801.10 and 801.13. We thank you for your

cooperation

About Informal Interpretations

Informal interpretations provide guidance from previous staff interpretations on the applicability of the HSR rules to specific fact situations. You should not rely on them as a substitute for reading the Act and the Rules themselves. These materials do not, and are not intended to, constitute legal advice.

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