Background. You know that in January 2009, after an on-air argument between Paul Sr. and Paul Jr., Senior fired Junior. To avoid a breach of agreement with the Discovery channel, owner of The Learning Channel, Teutul son and father signed a letter of agreement by which: “Junior shall extend to Senior, upon Senior’s request, an option to purchase all of his shares in Orange County Choppers Holdings, Inc. for fair market value as determined by a procedure to be agreed to by the parties as soon as practicable.”
In November 09, Paul Senior tried to exercise this option, but Junior refused under the argument that the language of the January 2009 letter lacked essential terms concerning the appraisal process and was merely an unenforceable “agreement to agree.” The legal battle continues with Paul Senior asking Junior to turn over all his shares of OCC for an amount of $0.00. You asked ZERO dollar? How come can it be the value of Orange County Choppers? Richard Gray, a friend of a friend, CPA/ABV, CVA, ASA at Alpern Rosenthal an accounting firm in West Palm Beach, Florida explains for you what is fair value of a business. An interesting read, especially to all those of you owning a business.
What Is Fair Value?
In performing a valuation of a business the starting point is identifying and defining the standard of value that will apply based on the facts and circumstances surrounding the engagement. Common standards of value include fair market value, investment value, intrinsic value and fair value.
Fair value is used for a number of purposes. It can be the legal standard of value in dissenting shareholder cases in some states. It is the core standard of value used in the preparation of a fairness opinion. It is also the standard of value used for the valuation of assets for financial reporting purposes.
Dissenting shareholder / oppression cases
Fair value is commonly used in dissenting shareholder litigation. As a judicially mandated concept, it is subject to court interpretation and varies from state to state. Although the standard of fair value has not been not clearly defined in the past, more recently it has been established as the value of shares on a pro rata enterprise basis. However, this can be more than simply, “fair market value without the discounts”.
The definition of fair value differs from fair market value. A fair market value valuation is the price at which a business would change hands between a willing buyer and willing seller both knowledgeable about the relevant facts. In dissenting shareholder cases, fair value is generally defined as the value of the shares as of the day immediately preceding the corporate action leading to the dissent. Fair value is intended to estimate a fair and reasonable amount. It is not intended to represent a market transaction price. Some states allow discounts in computing fair value while others do not.
In determining fair value for a dissenting shareholder action, it is important to analyze the specific facts and circumstances of the situation and understand the appropriate statutes and case law of the jurisdiction.
Fairness opinions
A fairness opinion is a formal review that assesses whether a transaction is fair to shareholders from a financial point of view. It is often used in a corporate merger or acquisition to support the suitability of the acquisition price. Fairness opinions are designed to protect the interests of minority shareholders. The key to the fairness opinion is a valuation of the business. As noted, fair value is often the standard of value used in fairness opinions.
Financial reporting
As the reporting on financial statements under generally accepted accounting principles moves away from historical cost accounting and toward fair value, the fair value measurement principles in the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures have created yet another definition. The FASB ASC 820 incorporates SFAS No. 157 and 159 and states that fair value is ”The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.”
Fair value is the standard of value required under the FASB ASC pronouncement for both financial and non-financial assets. With respect to the measurement of fair value, fair value should be based on the assumptions that market participants would use when pricing the asset. Market participants are buyers and sellers in the market who are independent, knowledgeable and able and willing to transact in the market.
To summarize, the definition of the fair value standard is highly dependent on the purpose of the valuation and the facts and circumstances of the particular valuation engagement. Due to this complexity, it is important to consult with an engage a qualified valuation professional. Richard Gray, CPA/ABV, CVA, ASA rgray@alpernfl.com
Good work on that, Mr Huze- ultimately, Jr will probably have to go to court with his own lawsuit, charging Sr with misappropriation of company assets…. In the end, the lawyers will walk away with whatever value is left in this deal, leaving a group of ex-employees wondering what happened….
Good reminder to me that owning my company is as much an obligation as it is a joy….. Jr made the mistake that many minority shareholders do- they blindly trusted the majority owner to look out for their interests, and in small private deals like this, unless you stay on top of things, a 49% ownership interest might as well be zero.
Does make Sr look pretty silly when he brags about “building his empire”, tho; All these years to build it up to zero? Awesome!
Ultimately a business is only worth what the scrap metal will bring. I’m cynical, all my stuff is paid for. peace
Does ANYONE actually care what these two ass clowns do anymore? It’s well past time to flush these turds from the public conciousness.
Tired subject. Surely there are better things to report.
Bradley.
Agreed, Bad Monkey. Agreed.
Any viable company, should have some $$$ value.
That number could be based on assets, income, projected sales,
intellectual property, patents, copyrights, TV contracts, etc.
On the other hand, who in their right mind would want to buy a large stake in OCC ?
Who?
Sign me up I’ll take 10,000 shares at $0.00 That should make me a majority share hold of a LOT OF CRAP.
What the hell is that building and equip and stock of T- Shirts worth anyway?
SSDD:David
Sad. That’s all it is. If one of ’em died unexpectedly today, they’d be sorry for not taking stock in what really matters…family.
I totally agree with Badmonkey,this has gotten to the point of totally unimportant,clash of two Drama Queens.
Bradley K Dec 2nd, 2010 at 9:33 pm
Tired subject. Surely there are better things to report.
Bradley.
So why on earth did you stop to read and comment on it?
well the building is worth nothing do to the fact its in forecloser and the bank wants it back and it kinda sucks that jr is part owner to nothing but still is part of a forecloser, cant be good on his record .
blah, blah, blah, blah… legaleze! nothing but mumbp jumbo and nothing said.
the court should make them sell everything then they can buy back what they want.
jr designed the logo it goes to him, everything else goes to mikey.
A well respected commentator, Byran Harley of Motorcycle USA, said back in April about the American Chopper: Senior vs. Junior show that, “Interest in the show hinges on capitalizing on the familial dispute and the tempestuous relationship between father and son” which is exactly what has taken it to one of the highest rating shows Discovery has ever run and also made it popular all around the world. If you were in Sturgis this year and saw the crowds lining up for pics and autographs with Paul Sr you would not say his popularity is down one iota. And I think most Sturgis attendees qualify as bikers. (Tho that’s probably another can of worms I’ve just opened.) Paul Jr also released his first build there to a capacity crowd. So c’mon guys, love ’em or hate ’em they are still the major players in the chopper building/tv industry and Cyril is smart to keep his blog fans up to date.
WHO CARES!!!!!
I agree, Doc. People do love them but, people also loved pet rocks and troll dolls. And those things are about as interesting as OCC. And about as useless.
Father / Son or Brother / Brother…partnerships never work out. There’s always a Taker and a Giver! TheGiver gets taken advantage of while the taker just keeps on taking! Tough lesson learned for some mostly theTaker lies to the family and hurts everyone. Family business 99% of the time just plain suck!
Rick’s dead on right.
I disagree to disagree! That’s what adds up to most of your silly Ass comments. The Facts are what they are! It was nice to supply us( Bloggers) the definition that The “Bean Counters” with a couple of Buttons, state what Economics 101 says. Cyrill, I found that very boring and a waiste of your talent. Why don’t you put FIGURES between Fair Market Value & Fair Value! WHERE”S THE FIGURES CYRILL? What is the Mortgage on the Building? What is the Value of the Building? What is the Equipment worth? Is there a a UCC Filing and what is the dollar amount, of the Filing? How much Inventory doess OCC Own. How many Bikes are out there that haven’t been Paid? How much do they get paid from Discovery Channel? How Much do they get, and make on Clothing? Cyrill, if you want to write a Interesting and informative article on the OCC Group then, fill in the Blanks of the above Questions,and then let the XPERT’S put a Number on OCC Real Value ? We will put a Value on Jr’s 20% and I Guarantee it aien’t “0” ! Even after all of the Answer’s above are answered I hope they don’t change the Questions!
Bigalyts. The unique answer to all your questions is OCC is a private, not a public company.
Jr.should had got the fair deal and Sr. should gave him his real share,and Jr. should have took his part and concentrate on his business.
CASE CLOSED.
Then, why Report about “The Deal” or “Fair Market” vs Present Market” without the FIGURES. Why talk about the Values without knowing the FigureS/ I keep comming back to this “Figure” thing, I wonder why? Cyrill, here’s what my tough Hungarian Father-in-law always, always told me “Figures Don’t Lie, but Liars Figure!
Bigalyts. The objective of my post is to explain to those readers who don’t know the process the different ways a business may be valued, the chosen method depending of the objective of this appraisal. Regarding a final number, you will know if there is a judgment. If there is a settlement out of court, nobody will know because you can expect that the parties will sign a confidential agreement forbiding any public discloser. .
these guys are like lazarus, they just keep coming back
new series should be called the occ cats
It’s a sad mess. Wiz
It is a private matter that is very public. The number$ are private and should be kept that way. How would you feel if someone kept asking you what you make a year? what is your house worth? How much is your equipment worth? ECT. The only that knows these numbers are those involved and that is as it should be. It is no one else’s business.
I don’t ask those kind of questions as it is none of my business. My concern is the state of the industry as a whole. I don’t ask Baker how many transmissions they have sold for what kind of money. I do ask if they are busy and where might that buisness come from as in where in the world are people buying. That way I might be able to chaneel my marketing efforts towards those customers.
Personally I hope the guys get their personal issues worked out for what is best for them and theirs. I have enjoyed watching the older episodes that have been running on the Discovery Channel on Mondays as well as the older Biker Buildoff episodes that have been running as well. I particularly have enjoyed watching the Liberty bike episode that culminated with the unveiling at the Birch Run Expo Center as that was the 1st face to face meeting I had with reps from OCC. That meeting was with Vinnie’s dad who was sales mgr at the time. When he left,I did not ask why as it was not any of my business and neither is what is going on now. It is between the Pauls and their attys.
Whatever the outcome,I will continue doing what I have always done. And let’s all hope that the country’s economy is on the rise and stays on that incline for the next decade or so. 😉 I hope everyone has a better holiday season.
About the only thing of interest here is that the developing contention between Jr & Sr indicates that the debate over their relationship (is an act or reality) seems to have been answered. They are simply what they appear to be on TV, no more, no less…. Regardless of “the Sturgis crowd.”
RE:
“…And I think most Sturgis attendees qualify as bikers. (Tho that’s probably another can of worms I’ve just opened.)
Ya, i would guess so….. 🙂
T-shirt consumers, certainly.
But “Bikers”…..??? Highly unlikely.
-nicker-
It’s gone from comical to sad and on to just plain stupid . I hate to admit it but I have seen alot of these episodes from the beginning to present . For a couple of half-wits they have made a pile of money . They didn’t really have any special talent , and were just one of those cases of being in the right place at the right time . Almost like they found a winning lottery ticket . They cashed it in and then fought over who should have the most . In the end , and it looks like it is real close , the lawyers will get the lions share along with network that already got paid . Sorry boys , play nice or someone will get hurt .
R.I.P. O.C.C.
I am only asking questions, because it makes good reading, and making this a ‘Let’s see what they are really arguing about and how much is it going to cost to make everybody go away is good copy I would, ask Baker How many Tranny’s do you sell and how much do you make on them? Why not if you are interested? I would Love to know- the answers to my Question’s above. The OCC Family is a Private Company, but they are revealing highly Personal Shit on TV in fron of millions of People in the Industry and most not in the Industry. Who the Hell would Call your Own Flesh and Blood a F_ cKing A$$hole with 5 Million People watching? This is the stuff that is part of what this Blog is about, Money, Family and Money! JimC if you don’t wantt to know any of that Personal stuff that is not your Business, then you might just want to know how long you are going to have a Job, with OCC! Cause, knowing stuff that aien’t your business,……….Just might be your Business, someday. And Cyrill, you can Bet, the Confidential Deal……Will Be Revealed, and you will probably be the 3rd Person to know, Cyrill.
People who kiss & tell usually run out of folks who’ll kiss ’em, so I have no problem being left out on the details. Thanks for the rough framework, Cyril, it’s enough for me. I haven’t watched the show in years but I was a faithful viewer the first few years so I will admit to being curious how things are going. Yeah, it’s a soap opera, but IMHO it is bike-related & therefore interesting 🙂
Bigal,I do not work for OCC,I do not even live in New York. 🙂
It amazes me that the show has turned into a courtroom battle and a family fight rather than the show it originally started out to be……A BIKE BUILDERS SHOW. I think Sr. and Jr. ought to audition for Jerry Springer.
Surf the net and you will find many other bike builders that could replace OCC in a heart beat(example) Tempest Cycles in FL, Hank Young in GA, Vision Customs in CA.
Lets get the program back on track to what it’s really suppose to be about……building and customizing bikes.
If you just can’t live without the drama? Have Sr. and Jr. do the Maury show…maybe do a lie detector test? or perhaps a DNA test to see who really is the father?
DUN DUN DUN. All I hear is more and more crap in which everyone would already have guessed. Come one OCC, and all associated, you know you are done…just walk away and not risk having to show your tail between your legs a few months down the road.
Jr. would do well to accept $0.00 for his share and avoid being taken down by the foreclosure and potential bankruptcy.
Ere regardless to their never-ending feud..the main culprit underlying everything…is money…simple and plain.And while I think they DO have some family issues,I can’t see it being an issue that can’t be solved.Given the fact that as a family they have had it rough in the interim,with the sons complaning about Paul Sr.,not being there for them..and Paul Sr.’s admission of early addictions and problems,the show let’s the viewers see that no matter how much money you have….money can’t buy family values,or quality of life…As for the on-going dispute of the value of the company and all that…I read some of the comments posted,and all I’m going to say is that…even if the company’s building and inventory and equipment,debts and assets go ito foreclosure…the process involves probaly just the building and it’s tangible holdings..a smart investor will try to “buydown”the owed debt….meaning negoiating with some of the debtors to accept less on outstanding debt,than owed..which will benefit a potential investor..although they MAYNOT be in this type of bind..it makes for good “fodder”for the insuing drama..but on that piece…and as far as to the “valuation”of the company..whether public or private..a company is worth as much or as less.of what a willing buyer is willing to pay for it…..this economic cycle has proven that regardless to how big you are…you can go broke…just look at the list of businesses that have disappeared from the down turn..and “choppers”are luxury items……and the standard of buying in America is that people buy…what they WANT…not what they need….for example..after a reported $100 million dollar divorce settlement..Tiger Woods…builds a $ 50 million dollar house..and traditionally having a lot of money does not denote intelligience..some of these people have more money than God..and yet the truly priceless items…health,happiness,quality of life..an d a life free from the prying eyes of the public….for all their financial where-with-all….they are never happy…at no amount,can you ever buy the things that make life worth living..I personally hope they get it together…I don’t believe everything I see as it is…the ratings wouldn’t be as high,if there was not some contreversy going on..reality shows,cannot survive without extra “drama”..A prime example of that is Hulk Hogan..would Hulk relly be risking not being able to walk again at 57 years old,if he had a happy family life,and a sane wife..I think not….
OMG this whole thing is like everything you hear happens but hate to believe :o(
Right place, right time… probably…. but also same old story of any height of recognizability and/or fame going to peoples head’s, money and / or ego being the root of many evils (and sad stories &/or failures, not to mention self destruction), and most of all outside forces looking to cash in at all cost (divide and conquer). Clearly there were deep seeded issues to begin with, BUT, you can’t help but believe that if it all didn’t get sooooo big this probably wouldn’t of happened :o( Too bad it has to go down this way!