The Chancery Bank of Delaware: Appraisal Arbitrageurs Expose Need to Further Reform Defective Appraisal Statute
ABSTRACT
Appraisal arbitrageurs—hedge funds who purchase target stock after the announcement of a merger solely to pursue appraisal—test the bounds of aim of appraisal rights to protect dissenting shareholders from majority expropriation. The backlash against appraisal arbitrage has uncovered a need for additional legislative reform and unveiled Delaware judge’s shortcomings in engaging in highly technical corporate valuation. This Note analyzes aspects of the appraisal statute and its attendant judicial application in context with intended policy goals and underlying economic principles. And this analysis of Delaware jurisprudence, particularly as it pertains to inconsistent fair valuation approaches, reveals courts’ tacit political motives and legislative role.
As such, this Note proposes reforming Delaware’s appraisal statute beyond recent amendments to curb appraisal arbitrage and ensure certainty in appraisal proceedings. Specifically, this Note recommends that Delaware confine the market-out exception’s cash carve-out to interested transactions, limit appraisal rights to shareholders as of the record date, and delegate valuation in appraisal proceedings to a panel of independent finance professionals.
AUTHOR
J.D./M.B.A. Candidate, 2017, Vanderbilt University Law School; B.A., 2011, Vanderbilt University.