Bloomberg View, May 5, 2015 column: "Who can remember how to vote?" [Professional views of reported vote in favor of transaction by petitioner for "dissenter" rights to appraisal]

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Project Status

Forum participants were encouraged to consider appraisal rights in June 2013 as a means of realizing the same long term intrinsic value that the company's founder and private equity partner sought in an opportunistic market-priced buyout, and legal research of court valuation standards was commissioned to support the required investment decisions.

The buyout transaction became effective on October 28, 2013 at an offer price of $13.75 per share, and the appraisal case was initiated on October 29, 2013, by the Forum's representative petitioner, Cavan Partners, LP. The Delaware Chancery Court issued its decision on May 31, 2016, establishing the intrinsic fair value of Dell shares at the effective date as $17.62 per share, approximately 28.1% more than the offer price, with definitive legal explanations confirming the foundations of Shareholder Forum support for appraisal rights.

Each of the Dell shareholders who chose to rely upon the Forum's support satisfied the procedural requirements to be eligible for payment of the $17.62 fair value, plus interest on that amount compounding since the effective date at 5% above the Federal Reserve discount rate.

Note: On December 14, 2017, the Delaware Supreme Court reversed and remanded the decision above, encouraging reliance upon market pricing of the transaction as a determination of "fair value." The Forum accordingly reported that it would resume support of marketplace processes instead of judicial appraisal for the realization of intrinsic value in opportunistically priced but carefully negotiated buyouts.

For the news report referenced below, see

May 3, 2015 USA Today: "Money manager hits awkward snag in Dell buyout case" [Discovery that lead petitioner in "dissenter" rights for Dell appraisal voted in favor of transaction]

Source: Bloomberg View, May 5, 2015 column

Money Stuff

Death and Stock Picks

8 May 5, 2015 8:04 AM EDT

By Matt Levine

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Who can remember how to vote?

Are activists an important check on shareholder complacency? Left to their own devices, would big institutional shareholders be insufficiently protective of their own interests? Well I don't know but here is a story about how T. Rowe Price consistently opposed the 2013 leveraged buyout of Dell, of which it was a big shareholder, but somehow voted for the deal. Like, as far as I can tell, by accident. Like the guy in charge of telling everyone what a bad deal it was never talked to the guy in charge of hitting the vote button. "We are aware of a discrepancy in the communication of our voting instruction on the Dell buyout," says T. Rowe. What?

This is immediately relevant because T. Rowe is a plaintiff in an appraisal lawsuit, and the appraisal statute requires that you "neither voted in favor of the merger or consolidation nor consented thereto in writing." So T. Rowe would seem to be out of luck in its appraisal demand, though it has a pretty amusing reading of the statute to mean the opposite of what it says, which happens to be supported by case law. But the broader issue is: How do you vote the wrong way on a merger? What does this story say about the need for activist investors? About T. Rowe's concerns about high-frequency trading? About the efficiency of our public equity markets?

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This project was conducted as part of the Shareholder Forum's public interest program for "Fair Investor Access," which is open free of charge to anyone concerned with investor interests in the development of marketplace standards for expanded access to information for securities valuation and shareholder voting decisions. As stated in the posted Conditions of Participation, the Forum's purpose is to provide decision-makers with access to information and a free exchange of views on the issues presented in the program's Forum Summary. Each participant is expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants. It is a Forum rule that participants will not be identified or quoted without their explicit permission.

The management of Dell Inc. declined the Forum's invitation to provide leadership of this project, but was encouraged to collaborate in its progress to assure cost-efficient, timely delivery of information relevant to investor decisions. As the project evolved, those information requirements were ultimately satisfied in the context of an appraisal proceeding.

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