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The Shareholder Forumtm

special project of the public interest program for

Fair Investor Access

Supporting investor interests in

appraisal rights for intrinsic value realization

in the buyout of

Dell Inc.

For related issues, see programs for

Appraisal Rights Investments

Fair Investor Access

Project Status

Forum participants were encouraged to consider appraisal rights in June 2013 as a means of realizing the same long term intrinsic value that the company's founder and private equity partner sought in an opportunistic market-priced buyout, and legal research of court valuation standards was commissioned to support the required investment decisions.

The buyout transaction became effective on October 28, 2013 at an offer price of $13.75 per share, and the appraisal case was initiated on October 29, 2013, by the Forum's representative petitioner, Cavan Partners, LP. The Delaware Chancery Court issued its decision on May 31, 2016, establishing the intrinsic fair value of Dell shares at the effective date as $17.62 per share, approximately 28.1% more than the offer price, with definitive legal explanations confirming the foundations of Shareholder Forum support for appraisal rights.

Each of the Dell shareholders who chose to rely upon the Forum's support satisfied the procedural requirements to be eligible for payment of the $17.62 fair value, plus interest on that amount compounding since the effective date at 5% above the Federal Reserve discount rate.


 

 

For a printable copy of this report, click here.

Forum Report: Fair Investor Access (Dell Valuation Project)

 

Range of Dell Investor Information Requirements

Initial organizational planning of the Dell valuation project[1] has generated some very practical questions about the range of investor information requirements that should be accommodated in an “independent, peer-reviewed valuation report for the benefit of shareholders.” Forum participants are therefore encouraged to offer views about who and what should be considered.

Supporting responsible investor decisions

The purpose of an independent valuation is to provide all investors with fair access to the information needed to make their own decisions about a proposal being presented by insiders. We must therefore understand what information will be relevant to all the different decision-makers.

We must also understand who is responsible for which decisions. All investors should be able to rely upon a company’s directors for their informed judgment about what is best for the corporation and the generalized shareholder interests in it, but not for their judgment about what is best for the particular interests of each and every shareholder. As a practical matter, a company’s board is not in a position to determine the specific interests of each investor, and even if that were possible it is unlikely that a single recommendation would be equally suitable to all of a publicly traded company’s different investors. In any event, it is not a board member’s job to decide what investors should do. That is what fund managers are paid to do, and what some individuals choose to do for themselves.

It must then be the investor’s responsibility to obtain the information needed for investment decisions. Generally, the investor can rely upon a company to provide most of what is required. But investors get relevant information from a wide variety of sources,[2] and being a competitively effective investor requires knowing what to get and how to get it.

This investor expertise can be put to good use in guiding the current project’s specification of the information to be provided in the Dell valuation report. We therefore want to invite the best experts, and a diverse range of them.

Different views of information requirements

Preliminarily, we are assuming that the project should include representation of the following variations of information requirements:

A.    Active fund managers – Funds that are managed by professionals who select specific securities for investment will typically have the expertise required to perform their own analysis of a company’s long term enterprise value, and will be primarily interested in access to information that puts them on the same level as the proponent’s financial analysts.

B.  Passive fund managers – So-called “indexed” funds generally cannot justify staff expertise for company-specific value analysis, and will typically need to rely upon external reports for their consideration of a proposal.

C.     Individual investors – Individual investor expertise will vary, but it can be assumed that most will need professionally prepared research and analysis to be on a level with a transaction’s proponent.

D.    Trading managers – Whether acting for a fund or other financial services firm, or as an individual, investors concerned with current investing positions will need details of valuation variables to understand changes in expectations of approvals and appraisal rights.

E.     Professional advisors – Analysts providing research and advice to investors can be expected to want whatever information can be provided to support competitively distinguished professional services.

Your suggestions of any additional categories, particular needs or specific candidates we should be considering will be appreciated to assure our understanding of marketplace needs.

GL – February 28, 2013

Gary Lutin

Chairman, The Shareholder Forum

575 Madison Avenue, New York, New York 10022

Tel: 212-605-0335

Email: gl@shareholderforum.com

 

 

This project was conducted as part of the Shareholder Forum's public interest  program for "Fair Investor Access," which is open free of charge to anyone concerned with investor interests in the development of marketplace standards for expanded access to information for securities valuation and shareholder voting decisions. As stated in the posted Conditions of Participation, the Forum's purpose is to provide decision-makers with access to information and a free exchange of views on the issues presented in the program's Forum Summary. Each participant is expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

The management of Dell Inc. declined the Forum's invitation to provide leadership of this project, but was encouraged to collaborate in its progress to assure cost-efficient, timely delivery of information relevant to investor decisions. As the project evolved, those information requirements were ultimately satisfied in the context of an appraisal proceeding.

Inquiries about this project and requests to be included in its distribution list may be addressed to dell@shareholderforum.com.

The information provided to Forum participants is intended for their private reference, and permission has not been granted for the republishing of any copyrighted material. The material presented on this web site is the responsibility of Gary Lutin, as chairman of the Shareholder Forum.

Shareholder Forum™ is a trademark owned by The Shareholder Forum, Inc., for the programs conducted since 1999 to support investor access to decision-making information. It should be noted that we have no responsibility for the services that Broadridge Financial Solutions, Inc., introduced for review in the Forum's 2010 "E-Meetings" program and has since been offering with the “Shareholder Forum” name, and we have asked Broadridge to use a different name that does not suggest our support or endorsement.