It’s a general truism that appraisal only directly benefits those who dissent and seek fair value for their shares. But appraisal can also spur further litigation – especially when the result of the appraisal decision is a 100% premium over merger price. Such is the case with Shanda Games Limited. While our friends in Cayman have covered the Shanda Games Cayman appraisal, US litigation has followed. In a class action complaint filed in the SDNY, ex-Shanda shareholders have alleged that the Shanda board made misrepresentations in the lead-up to the merger, relying in part on the findings of the Cayman courts in their determination of Shanda’s fair value.
While appraisal requires no showing of wrongdoing, a board could overstep in campaigning for (or perhaps, against) a merger – and thus lead to additional fiduciary duty or securities law liability. As we previously covered, appraisal can be linked to disclosure obligations, and the failure to make proper disclosure can lead to liability.