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Appraisal Rights Litigation Blog

Category Archives: Appraisal Arbitrage

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CLS BlueSky: “Reality Check” on DFC Global By Profs. Korsmo and Myers

Posted in Appraisal Arbitrage, Fair Value, Merger Price, Supreme Court

Professors Korsmo and Myers, whom we have blogged about before, have a new post on CLS Blue Sky Blog, titled “A Reality Check on the Appeals of the DFC Global Appraisal Case.”  The Professors argue that the DFC Global appeal, which we’ve been covering, presents an attempt by deal advisors “to alter Delaware’s appraisal jurisprudence[,]”… Continue Reading

HLS Forum on Corp. Gov: “Delaware Appraisal at a Crossroads?”

Posted in Appraisal Arbitrage, Fair Value

The Harvard Law School Forum on Corporate Governance and Financial Regulation recently carried a post by Theodore Mirvis of Wachtell Lipton, “Delaware Appraisal at a Crossroads?”  This HLS Forum post discusses the recent DFC argument – which we’ve posted about – and lays out a variety of thoughts on future questions in appraisal and appraisal… Continue Reading

Delaware Chancery Hands Down Two New Appraisal Rulings

Posted in Appraisal Arbitrage, Merger Price

The Delaware Chancery Court just issued two significant appraisal rulings, the PetSmart opinion on Friday — awarding petitioners the merger price — and the SWS Group decision on Monday, which actually awarded stockholders less than the merger price.  We will post separately about our observations on these rulings. In the meantime, one immediate reaction is… Continue Reading

DFC Global a “Lightning Rod” for the Merger-Price Debate

Posted in Appraisal Arbitrage, Award Premium, Discounted Cash Flow Analysis, Fair Value, Merger Price, Supreme Court

The Financial Times published this critical assessment [$$$] of the DFC Global ruling and of the appraisal arbitrage strategy more generally, observing that the pending DFC Global appeal frames the current debate about what role, if any, merger price should play in appraisal cases.

Guest Post: The Use of Appraisal Arbitrage Strategies in Canada in Light of Dell

Posted in Appraisal Arbitrage, Canadian Appraisal Rights, Guest Post

** The content of this post is contributed by Goodmans LLP of Toronto, Canada.  We thank Sheldon Freeman of Goodmans for this contribution. In Canada, as in the U.S., shareholders are becoming increasingly interested in the use of “appraisal arbitrage” strategies in the context of certain M&A transactions.  While the circumstances and motivations for engaging… Continue Reading

The Real Problem With Appraisal Arbitrage

Posted in Appraisal Arbitrage, Award Premium, Discounted Cash Flow Analysis, Fair Value, Merger Price, Perpetuity Growth Rate, Stock Market Price, Supply-side Discount Rate, WACC

In response to the article on appraisal arbitrage by Gaurav Jetley and Xinyu Ji of the Analysis Group, about which we’ve posted before, Villanova Law Professor Richard A. Booth now argues in  The Real Problem With Appraisal Arbitrage [via Social Science Research Network] that Jetley and Ji’s charge against the Delaware courts for overly indulging… Continue Reading

Challenges for Appraisal Arbitrage?

Posted in Appraisal Arbitrage, August 2016 Amendments

Have the recent Delaware statutory amendments and major Dell decision threatened the appraisal arbitrage strategy?  Business Law Prof Blog (via a guest post) acknowledges that while these two developments do not prevent appraisal arbitrage — indeed, the Delaware legislature rejected a proposal to crack down on arbitrage — they may be part of an overall… Continue Reading

Does the Appraisal Remedy Discipline Corporate Management?

Posted in Appraisal Arbitrage, Appraisal-Eligible Deals, Distinct from Fiduciary Duty Claims, Entitlement to Appraisal, Market-out Exception, Merger Price, No Proof of Wrongdoing Needed

In a March 2016 working paper, Corporate Darwinism: Disciplining Managers in a World With Weak Shareholder Litigation, Professors James D. Cox and Randall S. Thomas detail several recent legislative and judicial actions that potentially restrict the efficacy of shareholder acquisition-oriented class actions to control corporate managerial agency costs. The authors then discuss new corporate governance… Continue Reading

Will Appraisal “Reform” Be Successful?

Posted in Appraisal Arbitrage, Dollar Amount of Appraisal Rights Filings, Interest on Appraised Value, Number of Appraisal Rights Filings, Prepayment of Merger Consideration, Short-Form Merger

As we’ve previously covered in this blog, the Delaware Legislature has proposed two changes to its appraisal statute in response to an increasing number of appraisal filings.  The first proposal, the De Minimis Exception, would require that anyone bringing an appraisal action have, at minimum, a $1 million stake in the company or 1 percent… Continue Reading

Moot Court Focuses on Delaware Appraisal Rights

Posted in Appraisal Arbitrage

Attorneys here at Lowenstein congratulate students of The Ohio State University’s Moritz College of Law on their victory in the 2016 Ruby R. Vale Corporate Moot Court Competition, as well as all the other teams participating.  The competition problem, authored by Professor Lawrence Hamermesh, considered issues of appraisal rights raised by recent cases Merion Capital… Continue Reading

Academics Propose New Reforms for Appraisal

Posted in Appraisal Arbitrage, Appraisal-Eligible Deals, Award Premium, Dollar Amount of Appraisal Rights Filings, Interest on Appraised Value, Merger Price, Number of Appraisal Rights Filings, Record Date

We’ve posted before about the article by Professors Charles Korsmo and Minor Myers analyzing the recent surge in appraisal activity.  These co-authors have prepared a new draft article to be published in the Delaware Journal of Corporate Law, proposing reforms for appraisal litigation.  Based on their latest research the authors stand by their prior conclusion… Continue Reading

Opportunities with Appraisal Litigation

Posted in Appraisal Arbitrage, Award Premium, Number of Appraisal Rights Filings

Today’s Hedge Fund Law Report ran an article about the appraisal remedy, its positive results and its distinctiveness from traditional stockholder litigation.  That article, “Stockholder Appraisal Actions Present an Attractive Litigation-Based Strategy for Hedge Fund Managers,” also discusses the proposed legislative amendments, judicial limitations and potential opportunities that we’ve posted on before.

Korsmo & Myers Article Analyzing Surge in Appraisal Activity Now Published

Posted in Appraisal Arbitrage, Dollar Amount of Appraisal Rights Filings, Merger Vote, Number of Appraisal Rights Filings, Record Date

We have blogged before (see here) about a then-forthcoming law review article by Professors Charles Korsmo (Associate Professor at Brooklyn Law School) and Minor Myers (Associate Professor at Brooklyn Law School) analyzing the value-creation resulting from the increased use of appraisal arbitrage.  The authors’ paper has now been published in the final 2015 issue of… Continue Reading

Analyzing the Observed Increase in Appraisal Arbitrage

Posted in Appraisal Arbitrage, Equity Risk Premium, Interest on Appraised Value, Record Date

The July 2015 article “Appraisal Arbitrage – Is there a Delaware Advantage?” by Gaurav Jetley and Xinyu Ji of the Analysis Group analyzes the extent to which economic incentives have improved for appraisal arbitrageurs in recent years, which the authors believe helps explain the “observed increase” in appraisal activity.  The article concludes that appraisal arbitrageurs… Continue Reading

Appraisal Rights and Institutional Investors’ Fiduciary Duties

Posted in Appraisal Arbitrage, Distinct from Fiduciary Duty Claims

In this 2015 article from the Arizona Law Review, “Shareholder Litigation Without Class Actions,” Boston University Law School Professor David Webber imagines a “post-class-action landscape for shareholder litigation,” positing that the class action vehicle is becoming gutted by the courts and that mandatory arbitration provisions are undermining the class action device.  In this so-called post-class-action… Continue Reading

Delaware Chancery Looks to Merger Price in BMC Software Ruling

Posted in Appraisal Arbitrage, Discounted Cash Flow Analysis, Equity Risk Premium, Fair Value, Merger Price, Synergies, Terminal Value

Vice Chancellor Glasscock issued his valuation decision this week in the BMC Software case, which we have previously blogged about concerning its threshold ruling rejecting any share-tracing requirements and thus allowing appraisal arbitrageurs to proceed with a valuation case. As we have previously reported, Merion Capital was seeking a 45% premium to the merger price,… Continue Reading

Delaware Chancery Court (Reluctantly) Dismisses Appraisal Challenge Based on Re-titled Stock Certificates

Posted in Appraisal Arbitrage, Consummation of Merger, Continuous Holder Requirement, Notice of Demand for Appraisal, Record Date

The Chancery Court granted summary judgment in favor of Dell against a number of stockholders who duly noticed their appraisal demands but whose stock certificates had been retitled before the effective date of the merger to their own custodians’ nominees. As is typical for an appraisal challenge, DTC certificated the dissenting stockholders’ shares into the… Continue Reading

With Unreliable Management Projections and No Market-Based Models, Delaware Chancery Pegs Fair Value to Merger Price

Posted in Appraisal Arbitrage, Discounted Cash Flow Analysis, Fair Value, Merger Price, Precedent Transactions, Synergies

Delaware’s latest appraisal decision in LongPath Capital v. Ramtron International Corp. adopted the merger price as its appraisal valuation, but stands apart from the other recent appraisal decisions that likewise fell back on transaction consideration. Here, the court’s lengthy opinion repeatedly lamented the lack of any remotely reliable means of valuation other than the merger… Continue Reading

Table Is Set in Dell Case for Another Look at Arbitrage

Posted in Appraisal Arbitrage, Merger Vote, Waiver of Appraisal Rights

On Monday the Delaware Chancery Court heard challenges by Dell to the entitlement of various dissenting shareholders to pursue their appraisal claims.  Dell’s challenges included failures by shareholders to timely and accurately assert their appraisal rights, and a lack of continuous ownership of Dell stock based on purported changes in the nominal ownership of such… Continue Reading

“Shareholder Litigation That Works”

Posted in Appraisal Arbitrage, Number of Appraisal Rights Filings, Record Date

Professors Korsmo and Myers have once again lauded the benefits of appraisal litigation and chastised its critics for pressuring the Delaware bar council to reconsider its recent decision not to limit or eliminate appraisal arbitrage.  In their latest piece, the authors reaffirm their findings that appraisal cases comprise that rare form of shareholder suit “where… Continue Reading

Deal Lawyers Lobby Delaware Bar to Reconsider Its Refusal to Limit or Eliminate Appraisal Arbitrage

Posted in Appraisal Arbitrage, Number of Appraisal Rights Filings, Record Date

As we’ve previously posted, the Corporation Council of the Delaware bar had taken up the question of whether to ban or curtail appraisal arbitrage, and more recently decided to take no such action after determining that the practice had no discernable negative effects on mergers and acquisitions and, if anything, continued to protect shareholder value. … Continue Reading

Appraisal Rights a Hot Topic at 27th Annual Tulane Corporate Law Institute

Posted in Appraisal Arbitrage, Interest on Appraised Value, Merger Price

Delaware judges, SEC leaders and lawyers from across the country convened in New Orleans last week for the 27th annual Tulane Corporate Law Institute, a two-day series of panels on March 19-20 analyzing Delaware corporate law and M&A deal making.  Appraisal arbitrage garnered considerable attention as several panels discussed the practice as well as the… Continue Reading

Delaware Bar Finds That Appraisal Remedy Protects Investors

Posted in Appraisal Arbitrage, Number of Appraisal Rights Filings, Record Date

We posted earlier this week regarding a white paper written by the Council of the Corporation Law Section of the Delaware state bar, which was issued alongside the Council’s proposed amendments to Delaware’s appraisal statute.  The Council had considered amendments to address the practice of appraisal arbitrage, but ultimately did not make any recommendations to eliminate… Continue Reading

Delaware Bar Committee Decides Not to Eliminate or Limit Appraisal Arbitrage

Posted in Appraisal Arbitrage, Number of Appraisal Rights Filings, Record Date

We posted last week about new legislative amendments to the appraisal remedy proposed by the Council of the Corporation Law Section of the Delaware state bar association, an influential group of Delaware lawyers.  The amendments were accompanied by an explanatory white paper explaining the rationale behind those recommendations that the Council made, and of note,… Continue Reading