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Vice Chancellor Lester quotes in an opinion from 2014[1]: [S]elf-interest concentrates the mind, and people who must back their beliefs with their purses are m

by pliny 10y ago

Vice Chancellor Lester quotes in an opinion from 2014[1]: [S]elf-interest concentrates the mind, and people who must back their beliefs with their purses are more likely to assess the value of the judgment accurately than are people who simply seek to make an argument. Astute investors survive in competition; those who do not understand the value of assets are pushed aside. There is no similar process of natural selection among expert witnesses and [] judges And ―The benefit of the active market for UFG as an entity that the sales process generated is that several buyers with a profit motive were able to assess these factors for themselves and to use those assessments to make bids with actual money behind them. For me (as a law-trained judge) to second-guess the price that resulted from that process involves an exercise in hubris and, at best, reasoned guess-work. [1] http://courts.delaware.gov/Opinions/Download.aspx?id=215980 http://courts.delaware.gov/Opinions/Download.aspx?id=215980

thegranderson 10y ago
Apparently this Laster guy has been an tough judge for cases like this over the past few years, and has spoken out against this before: From the article (in reference to shutting down a suit against Aruba for selling too cheaply to Hewlett Packard) "It wasn’t a first for Mr. Laster, long the court’s firebrand. In his six years on the bench, he has made weeding out weak cases something of a pet issue. But “this time feels different,” said Ed Micheletti of Skadden, Arps, Slate, Meagher & Flom LLP, in part because Mr. Laster’s colleagues are joining him." http://www.wsj.com/articles/the-judge-who-shoots-down-merger-lawsuits-1452076201 http://www.wsj.com/articles/the-judge-who-shoots-down-merger... It seems that in this case he felt that the price discovery mechanism of the process and go-shop wasn't sufficient to reach the theoretically "correct" price, which makes sense. The reason any market approaches efficiency is because investors can easily buy and sell undervalued or overvalued securities. In massive transactions of this sort, there are only a handful of buyers who can participate, and it would be unreasonable for such a situation to be as efficient in price discovery as a liquid, publicly traded market. My sense is that the issue is more with the law, and ability to challenge this sort of thing (which is mostly capitalized on by specialized hedge funds who buy shares and sue) holds a transaction to a different standard than when it actually occurred. Specifically - the board, representing the fiduciary interests of shareholders, should be expected to make a reasonable effort to get the best price. If markets are not efficient and no one has the capital to step up and make a purchase, how would they know that? You can never prove the counterfactual in that type of situation, and it seems dangerous to attempt to do so via ex-ante analytical modeling.[1] 1. I get that this concept is widespread in settlements of all sorts (loss of use, damages, etc.), but in this case, no one was defrauded or coerced. Shareholder agreements were obeyed, and that should be that.

by pliny 10y ago

thegranderson 10y ago

Apparently this Laster guy has been an tough judge for cases like this over the past few years, and has spoken out against this before: From the article (in reference to shutting down a suit against Aruba for selling too cheaply to Hewlett Packard) "It wasn’t a first for Mr. Laster, long the court’s firebrand. In his six years on the bench, he has made weeding out weak cases something of a pet issue. But “this time feels different,” said Ed Micheletti of Skadden, Arps, Slate, Meagher & Flom LLP, in part because Mr. Laster’s colleagues are joining him." http://www.wsj.com/articles/the-judge-who-shoots-down-merger-lawsuits-1452076201 http://www.wsj.com/articles/the-judge-who-shoots-down-merger... It seems that in this case he felt that the price discovery mechanism of the process and go-shop wasn't sufficient to reach the theoretically "correct" price, which makes sense. The reason any market approaches efficiency is because investors can easily buy and sell undervalued or overvalued securities. In massive transactions of this sort, there are only a handful of buyers who can participate, and it would be unreasonable for such a situation to be as efficient in price discovery as a liquid, publicly traded market. My sense is that the issue is more with the law, and ability to challenge this sort of thing (which is mostly capitalized on by specialized hedge funds who buy shares and sue) holds a transaction to a different standard than when it actually occurred. Specifically - the board, representing the fiduciary interests of shareholders, should be expected to make a reasonable effort to get the best price. If markets are not efficient and no one has the capital to step up and make a purchase, how would they know that? You can never prove the counterfactual in that type of situation, and it seems dangerous to attempt to do so via ex-ante analytical modeling.[1] 1. I get that this concept is widespread in settlements of all sorts (loss of use, damages, etc.), but in this case, no one was defrauded or coerced. Shareholder agreements were obeyed, and that should be that.