Guidance on How to Value Minority Stock

The Louisiana Third Circuit Court of Appeals recently clarified the valuation method available to minority shareholders who dissent to the valuation of their shares in a short form merger. In Duncan v. Moreno Energy, Inc., Third Circuit, No. CA 09-1033 (3/10/10), the minority shareholders of Moreno Energy Services, Inc. brought suit claiming their shares were undervalued in the company’s short form merger with Moreno Energy Incorporated. The minority shareholders argued that their minority stock should be valued as of the date the lawsuit was filed.

However, the court found no basis in Louisiana law for such a valuation and sided with the defendant in determining that the appropriate valuation date is the day before the merger was effected. The court reasoned that the date of the lawsuit could not be the determinate date because that would effectively require the court to value the stock of the surviving entity, Moreno Energy Incorporated, which the plaintiffs never owned.

Allen & Gooch is providing this legal update for informational purposes only. This article should not be construed as legal advice or a legal opinion as to any specific facts or circumstances. You should consult your own attorney concerning your particular situation and any specific legal questions you may have.