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Dell Asked to Respect Rights of Former Co-Investors to Long Term Value
In a letter sent yesterday to Michael Dell (see below), the increasingly vocal supporter of capitalist and
charitable interests was asked to consider instructing Dell Inc.’s
attorneys to withdraw a court filing that was apparently designed to
discourage his company’s former shareholders from exercising their
rights to appraisal.
The filing demanded copies of extensive records from each of the
investors that have volunteered to act as “petitioners” to guide the
appraisal proceedings, requiring copies of all documents since January
2011 relating to their consideration of Dell. This kind of record
production can of course be especially burdensome for fund managers
that may have had several researchers, analysts, portfolio managers,
proxy voting officials and even board members involved in reviews of a
company.
Although demands for a representative party’s records of investment
evaluation are common in securities class actions, in which the claims
are based on a plaintiff’s assertion that it was misled in its
decisions, there is no reason to consider the past or present views of
a petitioner in an appraisal proceeding. The appraisal is to be
conducted by the court, which may consider expert views. Unless a
petitioner plans to take the unusual action of presenting itself as an
expert in testimony, its views would have no relevance in the
proceeding.
The legal process of resolving this records demand, whether argued or
conceded, would be costly to both Dell and the investors – petitioners
as well as the more than hundred other former shareholders who may
share in the allocation of expenses. While Dell’s lawyers may have
considered this cost justified to obstruct the appraisal proceeding,
none of the parties can be expected to benefit from continuing this
legal diversion.
Please let me know if you have any questions. I will of course report
Mr. Dell’s response to the letter.
GL – July 15, 2014
Gary Lutin
Chairman, The Shareholder Forum
575 Madison Avenue, New York, New York 10022
Tel: 212-605-0335
Email:
gl@shareholderforum.com
[For the original letter with its referenced copy of
the court filing, click here.]
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[letterhead of The Shareholder Forum]
July 14, 2014
By email and postal service
Mr. Michael S. Dell
Dell Inc.
One Dell Way
Round Rock, Texas 78682
Dear Mr. Dell:
In the accompanying copy of a July 9, 2014 court filing, you will
see that Dell Inc.’s attorneys are making extensive demands for
records from the investors that have volunteered to serve as
petitioners for the appraisal proceeding in which more than a
hundred of your former shareholders are, like you, pursuing their
rights to the long term value of your company. I believe you will
want to consider withdrawing these document demands, since any
response – whether the attorneys for petitioners decide to oppose
or appease – will impose significant costs on your company as well
as on all the investors required to bear expenses.
As a reasonably informed non-lawyer, my view of the records being
demanded is that they could have no possible relevance to either
an investor’s rights to appraisal or the court’s conduct of the
appraisal. Especially in the context of an earlier round of legal
demands requiring investor responses to dubious challenges of
eligibility, the current demands seem to have no purpose other
than to create burdens that discourage investors from pursuing
their rights.
You may recall that during last year’s attention to your buyout I
consistently encouraged Forum participants to respect the
interests of all investors, including you, in your company’s long
term enterprise value. When we initiated the project to support
minority shareholders’ use of appraisal rights to realize that
long term value, I stated “Our objective is to support the
interests of investors who want the same thing that Michael Dell
and Silver Lake are seeking in their proposed acquisition: the
long term value of the Dell enterprise, which everyone apparently
agrees is greater than the price set by current market bids.”*
The viability of our capital markets depends on this respect of
both buyers and minority shareholders for the interests of the
other.
I must now ask you to consider your responsibility to your former
Dell shareholders and to the marketplace, and to instruct your
representatives to do what is right rather than what is legally
arguable.
Sincerely yours,
/s
Gary Lutin
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