## Facts

- Pueblo Bancorporation was a closely held Colorado bank holding company with 114,217 outstanding shares held by 38 shareholders.
- After a federal tax change, Pueblo sought to convert from C-corporation to S-corporation status to obtain pass-through tax treatment.
- Because S-corporations cannot have certain corporate or trust shareholders, Pueblo structured a merger to cash out ineligible minority shareholders, including Lindoe, Inc., which owned 6,525 shares (about 5.71%).
- Pueblo obtained an appraisal and offered a per-share cash-out price to ineligible shareholders; Lindoe dissented and demanded a judicial appraisal under Colorado’s dissenters’ rights statute.
- The parties did not dispute the corporation’s overall value; the dispute was whether the court could discount Lindoe’s shares for lack of marketability.

## Issues

1. Whether “fair value” under Colorado’s dissenters’ rights statute permits applying a shareholder-level marketability discount when appraising a dissenting minority shareholder’s shares in a cash-out merger.
2. Whether the decision to apply a shareholder-level discount is a question of law or a question of fact for the trial court.

## Decision

- The Colorado Supreme Court affirmed the court of appeals.
- The Court held that “fair value” means the dissenting shareholder’s proportionate interest in the value of the corporation as a whole, not the fair market value of the individual shares as a commodity.
- The Court ruled that no marketability discount may be applied at the shareholder level in determining statutory “fair value.”
- The Court characterized the permissibility of such discounts as a question of law governed by statutory interpretation.

## Legal Principles

- In a statutory dissenters’ rights appraisal, “fair value” is distinct from “fair market value” and is measured by the shareholder’s pro rata share of the corporation’s value as a going concern.
- Shareholder-level marketability discounts are incompatible with “fair value” because they reduce compensation based on the very minority and liquidity constraints the statute is intended to protect against.
- Whether a shareholder-level discount may be applied under the dissenters’ rights statute is a legal question requiring a uniform rule, not an exercise of trial-court valuation discretion.

## Conclusion

Colorado’s dissenters’ rights statute requires paying a dissenting shareholder the pro rata value of the corporation, and courts may not reduce that amount by applying a shareholder-level discount for lack of marketability.


Pueblo Bancorporation v. Lindoe, Inc., 63 P.3d 353 (Colo. 2003)