October 2017

Seekingalpha has published this piece, “Appraisal Rights: Nontraditional Shareholder Activism” by Aberdeen Asset Management.  In this post, Aberdeen recounts the increase in appraisal in this decade, and focuses on how investors have sought to realize additional returns in the appraisal process.  Aberdeen then highlights the risks, including legislative risks (which we have covered before) in noting that appraisal is “as much of a legal strategy as it is an investment strategy” and in noting that proper appraisal experience is important to evaluating any appraisal opportunities.

As reported in Law360 [$$], on October 11, 2017 the Delaware Supreme Court heard argument appealing the Chancery Court’s ruling in the ISN Software appraisal case.  We have previously posted on the trial court’s decision here, in which Vice Chancellor Glasscock awarded a premium to the merger price.  The Supreme Court did not rule and did not indicate when it would do so.  You can see the complete oral argument here (under the October 11, 2017, listing; ISN Software v. Ad-Venture Capital).  Unlike the Dell and DFC Global arguments, the Supreme Court did not convene en banc – that is, with a full five-justice proceeding – and instead conducted argument by a three-justice panel, which did not include the Chief Justice.

We will continue to monitor the docket and post when the ruling is issued.

Lexology’s Federal Securities Law Blog has this analysis of the recent article we posted about, the High Cost of Fewer Appraisal Claims.  The author, from Porter Wright in Ohio, notes that the recent data on appraisal claims dispel certain arguments made by the anti-appraisal crowd. In particular, he writes, “Prior to the 2016 amendments, many proponents of limiting appraisal rights argued that shareholders who invoke their appraisal rights negatively affect non-dissenting shareholders; their thought being that buyers in transactions routinely withhold giving their highest, top-dollar bid due to the risk that some of the buyer’s money will have to be used later to defend against appraisal litigation . . . [but], if this theory was true, then deal premiums would have increased after the 2016 amendments.”  The recent research suggests this may not be the case.

The analysis concludes with an appeal to states outside Delaware considering appraisal legislation or that have appraisal laws: “Regardless of sophisticated investors using the appraisal arbitrage strategy, perhaps having expansive appraisal rights actually benefits target shareholders in the long run? Due to the study’s findings, it might be best if other states take a wait-and-see approach to better understand the impact of Delaware’s amendments before they follow suit.”