Opinion ID: 2103794
Heading Depth: 1
Heading Rank: 2

Heading: The issuance of the 37,736 shares to Chesler and his associates.

Text: This transaction is attacked on two grounds. First, it is said that the recipients of the shares made an immediate profit of upwards of $500,000, because the stock was valued at $53 a share, whereas the market was $66¾ a share. This market value is of June 1956. But the agreement with Chesler was made some time in April. The market quotations in early April ranged from a high of 60 on April 3 to a low of 55½ on April 10. The price of the stock appears to have been subject to a good deal of fluctuation, for after reaching a high of 67¾ on April 26 it dropped to a high of 57 on May 29. The agreed price of 53 does not seem clearly unreasonable, in the light of the large number of shares issued to the Chesler group, the immediate marketing of which would certainly have entailed difficulty. Moreover, the price of 53 was the same price paid by Goldhar and his group, in an arms-length transaction, when they acquired their 63,000 shares of Universal a few weeks before. Finally, the shares were bought for investment, not speculation. Thus the facts are doubtful support for objector's charge of an immediate, unlawful profit on the shares. Second, it is contended that Universal should have borrowed the money. Plaintiff and defendants reply, first, that this was a question of business judgment, and second, that Universal had no available borrowing power at the banks. There is evidence in the record supporting this second answer. We think that the probability of a recovery under the second count is highly doubtful.