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I am surprised at the amount of misinformation in this thread (have people actually even read the post? It answers most of these questions!). > This means the

I am surprised at the amount of misinformation in this thread (have people actually even read the post? It answers most of these questions!). > This means the more disturbing part is that the judge has had 3 years of hindsight where parts of Dell's plan have been realized, making it appear as though they were inevitable when at the time it was still highly uncertain (as reflected in the stock price). If Dell, Inc was now in the shitter he wouldn't be awarding $3.87 / share, that's for sure. That's not what the judge was ruling on, and it's not cited in his decision explaining the numbers (agree with him or not, his reasons are compelling for how he arrived at the numbers). The ruling is that at the time of the take-private, Silverlake must have valued the company at his price - the highest price - because if not, the purchase would not have offered a compelling return for a private equity investor. What's happened in the last three years did not enter the equation.

dharmon 10y ago
When you do valuations you must take risk into account, and with the benefit of hindsight it is far too easy to imagine that 3 years ago the future as it played out was more inevitable than it actually appeared at the time. Hindsight bias is usually unconscious, so its unsurprising that it is not cited in the ruling. Your last sentence suggests that every acquisition is a swindling of shareholders, but again, you are not taking risk into account, and perhaps the judge did not either. Most professional investors do not adequately adjust for risk, so why would I expect a judge to?
- joshdickson 10y ago
  I am not offering an opinion on the matter, so I don't know what you mean by me not taking into account risk. You were inferring things from the judge's verdict that were not correct and I was merely pointing them out. I don't know why you are trying to make this point about adjusting for risk when the entire question revolves around what the stock was worth at a stationary point in time three years ago. There is no risk basis to the calculation as discussed here - it's not a question of the judge possibly taking it into account or not, the judge absolutely did not factor it in. Whatever has happened in the world in the ensuing three years would not have affected this lawsuit either way.
  - dharmon 10y ago
    > I don't know why you are trying to make this point about adjusting for risk when the entire question revolves around what the stock was worth at a stationary point in time three years ago. That you don't see how these two are connected is my point. Let me take a step back. The value of a company is the sum of the cash that can be taken out of the business in perpetuity discounted back to present value. A common mistake is thinking that you can nail this down to a precise figure. In fact, it is a range of potential values. Why? Because the future is uncertain, and those future cash flows are uncertain. In other words, there is risk involved. So in the optimistic scenario where everything in the business goes right, you get a high valuation. In a pessimistic scenario the valuation is lower. Which is correct? Nobody can tell from the outset. Now imagine you are doing a valuation for a business, but for the value of that business 3 years ago. You have had the advantage of seeing the trend those cash flows have taken the past 3 years, and whether you admit it to yourself or not, it will influence your valuation. That is all I am saying.
    - joshdickson 10y ago
      > You have had the advantage of seeing the trend those cash flows have taken the past 3 years... And what exactly are those trends? Dell has been private for three years, how the company is doing is not and has not been public since the deal closed. I see how they're connected and I understand your point in aggregate, but it's 1) not relevant in the first place and 2) even if it were, the positive economic picture you're painting isn't even apparent - Dell could be a disaster right now and nobody would know (and the judge still would have ruled similarly.)
      - dpark 10y ago
        >how the company is doing is not and has not been public since the deal closed This is untrue. Dell has released financials at least once since they went private, when they were bidding for EMC.
T2_t2 10y ago
The worrying part is the value is something NO ONE will pay. "Things are worth what people will pay for them" is pretty much rule #1 for valuations.
EGreg 10y ago
I find it interesting in general how people, after seeing a one-sided video or article or whatever, wonder "how can X be so irrational and stupid"? X can be a judge, a politician, etc. This is often followed by something about conspiracy or incompetence by simple selection. But still, people rarely think about what really went on in the head of the X. They just like to strawman X and reshare the narrative. It often turns out (at least 50% of the time) that there is more to the story and X's decision process is actually reasonable given all the facts they has to deal with. But I am impressed by why people have a tendency to ignore that. I guess in a meta way, my own comment engaged in the same thinking to some extent, about commenters. I will say one more thing though: the # of comments a political item gets indicates how controversial it is, while the # of shares it gets indicates how many people agree. Horizontal vs Vertical measures. Anyone write about this?
- udkl 10y ago
  In a non judicial system I would agree with you. In a judicial system, the decision maker should document the facts and reasoning that were considered to arrive at the conclusion.... some of it is included in the article ....

dharmon 10y ago

When you do valuations you must take risk into account, and with the benefit of hindsight it is far too easy to imagine that 3 years ago the future as it played out was more inevitable than it actually appeared at the time. Hindsight bias is usually unconscious, so its unsurprising that it is not cited in the ruling. Your last sentence suggests that every acquisition is a swindling of shareholders, but again, you are not taking risk into account, and perhaps the judge did not either. Most professional investors do not adequately adjust for risk, so why would I expect a judge to?

joshdickson 10y ago
I am not offering an opinion on the matter, so I don't know what you mean by me not taking into account risk. You were inferring things from the judge's verdict that were not correct and I was merely pointing them out. I don't know why you are trying to make this point about adjusting for risk when the entire question revolves around what the stock was worth at a stationary point in time three years ago. There is no risk basis to the calculation as discussed here - it's not a question of the judge possibly taking it into account or not, the judge absolutely did not factor it in. Whatever has happened in the world in the ensuing three years would not have affected this lawsuit either way.
- dharmon 10y ago
  > I don't know why you are trying to make this point about adjusting for risk when the entire question revolves around what the stock was worth at a stationary point in time three years ago. That you don't see how these two are connected is my point. Let me take a step back. The value of a company is the sum of the cash that can be taken out of the business in perpetuity discounted back to present value. A common mistake is thinking that you can nail this down to a precise figure. In fact, it is a range of potential values. Why? Because the future is uncertain, and those future cash flows are uncertain. In other words, there is risk involved. So in the optimistic scenario where everything in the business goes right, you get a high valuation. In a pessimistic scenario the valuation is lower. Which is correct? Nobody can tell from the outset. Now imagine you are doing a valuation for a business, but for the value of that business 3 years ago. You have had the advantage of seeing the trend those cash flows have taken the past 3 years, and whether you admit it to yourself or not, it will influence your valuation. That is all I am saying.
  - joshdickson 10y ago
    > You have had the advantage of seeing the trend those cash flows have taken the past 3 years... And what exactly are those trends? Dell has been private for three years, how the company is doing is not and has not been public since the deal closed. I see how they're connected and I understand your point in aggregate, but it's 1) not relevant in the first place and 2) even if it were, the positive economic picture you're painting isn't even apparent - Dell could be a disaster right now and nobody would know (and the judge still would have ruled similarly.)
    - dpark 10y ago
      >how the company is doing is not and has not been public since the deal closed This is untrue. Dell has released financials at least once since they went private, when they were bidding for EMC.

T2_t2 10y ago

The worrying part is the value is something NO ONE will pay. "Things are worth what people will pay for them" is pretty much rule #1 for valuations.

EGreg 10y ago

I find it interesting in general how people, after seeing a one-sided video or article or whatever, wonder "how can X be so irrational and stupid"? X can be a judge, a politician, etc. This is often followed by something about conspiracy or incompetence by simple selection. But still, people rarely think about what really went on in the head of the X. They just like to strawman X and reshare the narrative. It often turns out (at least 50% of the time) that there is more to the story and X's decision process is actually reasonable given all the facts they has to deal with. But I am impressed by why people have a tendency to ignore that. I guess in a meta way, my own comment engaged in the same thinking to some extent, about commenters. I will say one more thing though: the # of comments a political item gets indicates how controversial it is, while the # of shares it gets indicates how many people agree. Horizontal vs Vertical measures. Anyone write about this?

udkl 10y ago
In a non judicial system I would agree with you. In a judicial system, the decision maker should document the facts and reasoning that were considered to arrive at the conclusion.... some of it is included in the article ....