1302009 Informal Interpretation

Michael Verne

Acquisitions made after the one year period that was filed for should be calculated using the 45 days prior to the acquisition(s) during the five year period. The locked in market price is only for the one year prior to expiration of the notification.
UPDATE: October 15, 2015.  This no longer reflects the position of the PNO.



Sent: Thursday,February 21, 2013 3:34 PM

To: Verne, B. Michael; Walsh,Kathryn

Subject:RE: SOT - Stock Question

Sorry for the confusedsentence structure in my last email. Please ignore. (I hit send by accidentand before I looked at my note). Let me try again.

Suppose that the stock price increases in #3, so thatthe lowest closing price in the 45 days prior tothe acquisition is$150 per share. Ifwe measured the marketprice based on the 45 days prior to the acquisition, the marketprice of the shares already held wouldbe $150M. In other words, the current holdings would already exceed the $100 million(as adjusted) threshold and- it would seem-- X could lock in the 5-year grace periodat that point by acquiring a singleshare. I think thatthis is an allowable reading of 801.13(a)(2)and 801.10(c)(1). Am I correct?

From: (Redacted)

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 increasesin #3, so that the lowest closingprice in the 45 days prior to theacquisition is $150 per share,so that value of the stock held priorto the acquisition is $150M and already exceedsthe $100 million (as adjusted)threshold, assuming that it is permissiblecalculate the price based on the 45 days prior tothe acquisition. If that isthe case, X could lock in the 5-year grace periodby acquiring a single share of stock.Do I have this right?

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

Sent: Thursday, February21, 2013 2:49 PM

To: (Redacted); Walsh, Kathryn

Subject:RE: SOT- Stock Question

Jeff- you use the 45 days prior to the 803.5(a) noticefor the stock acquired duringthe year following notification as well as the stock alreadyheld. The whole pointof calculating it prior to filing is to lock in a value. Sothe value of the stock held after the acquisition duringthe first year would be 2.5 MM x$70= $175 MM, exceeding the $100 million(as adjusted) threshold and allowing 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 periodprior 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 priorto the acquisition).

From: (Redacted)

Sent: Thursday, February 21, 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 HSR on January 1. X alreadyholds 1,000,000 shares of stock with a current marketprice of $70 per share. (Marketprice being calculated by the lowest price in the 45 days before the 803.5(a) notice is sent).

2. Xintends to acquire an additional1,500,000 in additional shares in the 12 monthsfollowing expiration of the HSRwaiting period. Soat the "market price" calculated off the 803.5(a) notice, X will exceedthe $100 million, as adjusted, threshold. X files at that higher threshold.

3. X, in fact, acquires the 1,500,000 shares in the 12 monthsfollowing the expiration of the HSR waitingperiod. However, the "market price" of the stock dropped to $35 per share, asmeasured by the lowest closing price in the 45 days prior to the acquisition.

It seems tome that, under 801.10(c)(1), to calculate the "market price" for the stock held and acquired in (3), we canuse either the lowestclosing bid price in the 45 days prior to the acquisition, or the 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 waiting period,so the 5 year grace period is locked in.

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

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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