Piemonte v. New Boston Garden Corp.

387 N.E.2d 1145 (1979)


P was a stockholder in a company set to merge with D, which “entitled each plaintiff to demand payment for his stock form the resulting or surviving corporation and an appraisal in accordance with the provisions of (existing statute).”  Ps did so and commenced to seek a judicial determination of the fair value of their shares.  The shares were valued prior to the vote on the merger.

P argues that the market value method of valuation was not reasonable due to the limited trading of the stock.

D argues that the judge correctly valued the stock and was required to benchmark its value against similarly situated companies.

The judge weighted the three valuations as follows: 10% Market Value; 40% Earnings Value; 50% Net Asset Value.


Whether the judge’s decisions to allocate valuation was appropriate given the circumstances of the case.


Yes, the 10% was appropriate because of the lack of trading volume of the stock.  He was entitled to reconstruct and not to pure market value.

  • Fair market value is better for highly traded stocks on high value exchanges.  Where there isn’t an established market for such a stock, fair market value isn’t possible.
  • When there isn’t a market for the stock, a judge usually reconstructs the value on his own, but doesn’t need to do so.
    • The stock at issue was rarely traded on the Boston stock exchange.
    • The judge concluded that the volume of trading was good enough to use market valuation.
  • Valuation based on earnings – Judge used last five year’s worth of earnings to project $52/share, excluded extraordinary gains and losses, and then allows the appraiser to select a multiplier that suits the industry.  The judge didn’t use a specific multiplier for the industry, and instead made his own based on the favorable financial prospects of the company.  He then factored in particular risks to the company as well and arrived at 10X multiplier.
    • The judge in this case did not abuse his authority in excluding a year with significant expansion income.
  • Valuation based on Net Asset Value – The judge valued each entity separate and arrived at a total valuation of $23.2M.
    • Ds argue there is double counting of assets in this manner.  They also argue that the judge shouldn’t’ have refused to deduct $1M, which represented the good will of the Bruins.
      • Court says the judge wasn’t plainly wrong.
    • Ps argue judge didn’t explicitly value the Boston Garden.  The judge did not give reason for including it in the 9.4M book value.
      • Court says judge should do so on remand.
    • The judge stated he was constrained to accept the D’s expert’s valuation of the Bruins franchise.
      • Court says this is wrong and that judge should make his own determination on remand, which he is free to do.
      • Court also says he was wrong in bluntly accepting the P’s expert testimony on the value of concessions, where the Ds didn’t’ submit any opinion.  They remand for the judge to make his own determination.

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