4 ms·

Isn't that part of the risk when you invest in equities? If you don't want to be forced to sell (or deal with bankruptcies, etc.) you can always buy bonds or ET

Isn't that part of the risk when you invest in equities? If you don't want to be forced to sell (or deal with bankruptcies, etc.) you can always buy bonds or ETFs or other less risky ventures.

rayiner 10y ago
Shareholders take that risk against the backdrop knowledge that in situations like this they can seek appraisal from the court. Not that I think such appraisals make all that much sense with publicly-traded equities, but nonetheless these shareholders bought the stock assuming the appraisal right would be available.
- tomp 10y ago
  Courts of course should always be last resort, after all, there could be fraud (e.g. if the CEO was deliberately hiding some information that would have increased the market price). But the problem with this ruling is, that it's ridiculous - the court's argument is basically that the "fair value" is above what PE paid because PE wanted to make a profit! It basically contradicts the whole idea of the market (buying something if you think it's worth more than the current price)!
  - TheCoelacanth 10y ago
    In a market, typically things are sold voluntarily. These are people who were forced to sell.
    - scotty79 10y ago
      Exactly, you are abandoning market and its prices once you say "those stocks are just pieces of paper now, we'll give you few bucks for each so you won't sue us"
  - rayiner 10y ago
    The appraisal right makes sense for smaller companies, even in the absence of fraud. There, you can have a majority shareholder come in and force a minority to sell based on a lowball valuation. There are no competing PE offers or public exchange prices to use as a reference in that scenario, so the appraisal right at least ensures an independent look at the purported valuation.
  - cortesoft 10y ago
    It isn't ridiculous, it is the law: https://www.sec.gov/Archives/edgar/data/878280/000119312508204014/dex99f.htm https://www.sec.gov/Archives/edgar/data/878280/0001193125082... The PE firms bought the company knowing this could, and probably would, happen. It is factored into the price they are willing to pay.
TheCoelacanth 10y ago
Yes, but part of the risk of acquiring a company is that shareholders who opposed the sale will get the sale examined by a judge as they are entitled to under Delaware law.
cortesoft 10y ago
It isn't an inherent risk, because the law allows for you to demand a judicial appraisal for the 'true' value of their shares. You can say the same to the people buying a public company; there is an inherent risk that you will be forced to pay some shareholders more, so it should be factored in to the price you are willing to pay for the company.

Isn't that part of the risk when you invest in equities? If you don't want to be forced to sell (or deal with bankruptcies, etc.) you can always buy bonds or ETFs or other less risky ventures.

rayiner 10y ago

Shareholders take that risk against the backdrop knowledge that in situations like this they can seek appraisal from the court. Not that I think such appraisals make all that much sense with publicly-traded equities, but nonetheless these shareholders bought the stock assuming the appraisal right would be available.

tomp 10y ago
Courts of course should always be last resort, after all, there could be fraud (e.g. if the CEO was deliberately hiding some information that would have increased the market price). But the problem with this ruling is, that it's ridiculous - the court's argument is basically that the "fair value" is above what PE paid because PE wanted to make a profit! It basically contradicts the whole idea of the market (buying something if you think it's worth more than the current price)!
- TheCoelacanth 10y ago
  In a market, typically things are sold voluntarily. These are people who were forced to sell.
  - scotty79 10y ago
    Exactly, you are abandoning market and its prices once you say "those stocks are just pieces of paper now, we'll give you few bucks for each so you won't sue us"
- rayiner 10y ago
  The appraisal right makes sense for smaller companies, even in the absence of fraud. There, you can have a majority shareholder come in and force a minority to sell based on a lowball valuation. There are no competing PE offers or public exchange prices to use as a reference in that scenario, so the appraisal right at least ensures an independent look at the purported valuation.
- cortesoft 10y ago
  It isn't ridiculous, it is the law: https://www.sec.gov/Archives/edgar/data/878280/000119312508204014/dex99f.htm https://www.sec.gov/Archives/edgar/data/878280/0001193125082... The PE firms bought the company knowing this could, and probably would, happen. It is factored into the price they are willing to pay.

TheCoelacanth 10y ago

Yes, but part of the risk of acquiring a company is that shareholders who opposed the sale will get the sale examined by a judge as they are entitled to under Delaware law.

cortesoft 10y ago

It isn't an inherent risk, because the law allows for you to demand a judicial appraisal for the 'true' value of their shares. You can say the same to the people buying a public company; there is an inherent risk that you will be forced to pay some shareholders more, so it should be factored in to the price you are willing to pay for the company.