1302008 Informal Interpretation

Michael Verne

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.
UPDATE: October 15, 2015.  This no longer reflects the position of the PNO.



Sent: Thursday,February 21, 2013 3:08 PM

To: Verne, B. Michael; Walsh, Kathryn

Subject:RE: SOT- Stock Question


Thanks. Just to play this out, if the stock price increases in #3, so thatthe lowest closing price in the 45 days priorto the acquisition is $150 per share, so thatvalue of the stock held prior to the acquisition is $150M and already exceeds the $100million (as adjusted) threshold, assuming that it is permissiblecalculate the price based on the 45 days prior tothe acquisition. If that is the case, X could lock in the 5-year grace periodby acquiring a single share of stock. DoI have this right?

From: Verne, B. Michael [mailto:MVERNE@ftc.gov]

Sent: Thursday, February21, 2013 2:49 PM

To: (Redacted)

Subject:RE: SOT- Stock Question

(Redacted) - you use the 45 days prior to the 803.5(a) noticefor the stock acquired duringthe year following notification as well as the stock already held. Thewhole point of calculating it prior to filing is to lock ina 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) thresholdand allowing additional acquisitions up to the $500 million (as adjusted) thresholdduring the 5 year period. The language you reference in #3 of using eitherthe 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: (Redacted)

Sent:Tuesday, February21, 2013 2:05 PM

To:Verne, B. Michael;Walsh, Kathryn

Subject: SOT - Stock Question

Mike and Kate:

Thanks, as always, for addressing these questions.Here is a situation I want to run by you.

1. Natural person,X, files an H5R on January 1. X already holds 1,000,000 sharesof stock with a current market price of $70 per share.(Market price beingcalculated by the lowest price in the 45 days before the 803.5(a)notice is sent).

2. X intendsto acquire an additional 1,500,000 in additional shares in the 12 monthsfollowing expiration of the H5Rwaiting period. Soat the "market price" calculated off the 803.5(a)notice, X will exceed the $100 million, as adjusted, threshold. X files at that higher threshold.

3. X,in fact, acquiresthe 1,500,000 shares in the 12 months followingthe expiration of the HSR waiting period. However, the "market price" of the stockdropped to $35 per share,as measured by the lowest closing price in the 45 days prior to the acquisition.

It seems to me that,under 801.10(c)(1), to calculate the "marketprice" for the stock held and acquired in (3), we can useeither the lowest closingbid price in the 45 days prior to the acquisition, orthe lowest closingbid price in the 45 daysprior to the 803.5(a)notice. Do I have this right? This is important to determine whetherthe $100 millionwas exceeded in the 12 monthsfollowing the termination of the waitingperiod, so the 5 year grace period is lockedin.

It would certainly seem unfair if the person were denied the benefit of the 5 year period by a facts beyond his control. (Both the stock price and the timingof the purchases, which are subject to restrictionby the SEC).


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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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