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T.
Rowe Price Valuation of Challenged Dell Appraisal Rights
Some of
you have observed that T. Rowe Price has established a “fair value” of
their Dell stock for which appraisal is sought at only $13.75 per
share, as publicly stated by two of its funds that are subject to SEC
valuation and reporting requirements.[1]
The Dell holdings to which the reported valuations apply are among
those that may not be entitled to appraisal, though, and those
valuations should therefore not be expected to influence the court’s
determination of fair value for Dell shares that are held by other
investors with unchallenged rights to appraisal.
As
indicated in the referenced Notes of both fund reports, T. Rowe Price
has classified its Dell holdings as “Level 3” assets that do not have
observable pricing inputs and must therefore be valued by “good faith
judgements” of their Valuation Committee that “reports to the Board”
and is “chaired by the fund’s treasurer” with “representation from
legal, portfolio management and trading, operations, and risk
management.” It can be assumed that this committee and the board would
be fully informed of the questions about entitlement to appraisal
resulting from having voted their Dell shares in favor of the merger,
and that they may have accordingly considered it prudent to minimize
risks of SEC or investor actions by valuing the holdings based on the
amount of the offer price that would be realizable for shares that are
not entitled to appraisal.[2] Under these
circumstances, the Valuation Committee’s determination of value for
their holdings of “yes-voted” shares would be unrelated to investor
analyses and expert opinions the court might consider in its appraisal
of fair value.
In any
event,
the petitioners’
lead
counsel has committed itself – with explicit support of the court – to
advocate the interests of only the claimants entitled to appraisal
during next week’s valuation trial, even if those interests conflict
with the positions of counsel’s primary T. Rowe Price clients.[3]
You should therefore be able to rely upon lead counsel to address any
possible reference to the publicly reported T. Rowe Price valuation in
its proper context.
GL – September 30, 2015
Gary Lutin
Chairman, The Shareholder Forum
575 Madison Avenue, New York, New York 10022
Tel: 212-605-0335
Email:
gl@shareholderforum.com
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