4 ms·

Can anyone explain in basic terms how shareholders can be forced to sell their shares back?

by mikecsh 14y ago

chollida1 14y ago
For the most part they can't. That's why this deal came out at a 25% bump over where the share price was when the deal was announced. This bump is intended to entice shareholders to vote for it. From the shareholders perspective DELL US Equity has been in a downward slide for the past year and only rebounded with this news, so if they don't take the deal then they can probably expect the share price to fall from almost 14 back to under 10 pretty much instantly. To prevent a very small minority from stopping the will of a large majority once the deal has an overwellimng majority( I think its 95% but I might be wrong on the exact value), they can then force the remainder to take the deal. This might seem like a bad deal for the hold outs but if this type of provision wasn't' enabled then no company could ever go private as there would always be that one person who holds onto a single share just to be a pain in the ass:)
- pwang 14y ago
  In fact, this "last stakeholder" problem is one of the game theoretic reasons for things like eminent domain.
  - mikecsh 14y ago
    Thanks both of you for the explanation
  - antr 14y ago
    Squeeze-out legislation has eliminated this problem. With control thresholds at 90% to 95%, as of today it is rare that this "last stakeholder" problem arises, as minority shareholders consent for their share sale is not required. Having said that, if you look close at the consortium's offer, there is for sure a clause that states that the offer is for x%-100% of the outstanding share capital.
arjunnarayan 14y ago
Shareholders aren't being forced: theoretically the board represents the shareholders, and the board voted to accept the deal (and with a 25% premium on price, I would too, if I was on the board). In a sense if you are a shareholder who doesn't like this deal, you should have made that clear to your board members (or voted for different board members who shared your views) before.

Can anyone explain in basic terms how shareholders can be forced to sell their shares back?

by mikecsh 14y ago

Can anyone explain in basic terms how shareholders can be forced to sell their shares back?

For the most part they can't. That's why this deal came out at a 25% bump over where the share price was when the deal was announced. This bump is intended to entice shareholders to vote for it. From the shareholders perspective DELL US Equity has been in a downward slide for the past year and only rebounded with this news, so if they don't take the deal then they can probably expect the share price to fall from almost 14 back to under 10 pretty much instantly. To prevent a very small minority from stopping the will of a large majority once the deal has an overwellimng majority( I think its 95% but I might be wrong on the exact value), they can then force the remainder to take the deal. This might seem like a bad deal for the hold outs but if this type of provision wasn't' enabled then no company could ever go private as there would always be that one person who holds onto a single share just to be a pain in the ass:)

pwang 14y ago
In fact, this "last stakeholder" problem is one of the game theoretic reasons for things like eminent domain.
- mikecsh 14y ago
  Thanks both of you for the explanation
- antr 14y ago
  Squeeze-out legislation has eliminated this problem. With control thresholds at 90% to 95%, as of today it is rare that this "last stakeholder" problem arises, as minority shareholders consent for their share sale is not required. Having said that, if you look close at the consortium's offer, there is for sure a clause that states that the offer is for x%-100% of the outstanding share capital.

arjunnarayan 14y ago

Shareholders aren't being forced: theoretically the board represents the shareholders, and the board voted to accept the deal (and with a 25% premium on price, I would too, if I was on the board). In a sense if you are a shareholder who doesn't like this deal, you should have made that clear to your board members (or voted for different board members who shared your views) before.