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
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.
Note: On December 14, 2017, the
Delaware Supreme Court
reversed and remanded the
decision above, encouraging reliance upon market pricing of the
transaction as a determination of "fair value." The Forum
reported that it would resume
support of marketplace processes instead of
judicial appraisal for the realization of intrinsic value in
opportunistically priced but carefully negotiated buyouts.
For Dell Inc.
communications with employees relating to the views reported in the
article below, see
While Dell CEO Michael Dell and many at the top of the Dell executive
ladder stand to make out well in a move to take the company private, some
rank-and-file employees and mid-level executives are grumbling about how
the deal affects them. That's because Dell, which has used stock options
and restricted stock heavily as an incentive for employees in the past, is
simply cancelling many of the stock options it has awarded to employees if
the go-private deal is completed.
an internal e-mail to employees obtained by Ars Technica, the company
announced pending changes to its Long Term Incentive (LTI) program. Dell
plans to pay out the difference between the exercise price of options and
the $13.65-per-share go-private price to employees whose options were "in
the money"—with exercise prices below $13.65 per share. But options that
are "underwater"—issued when Dell's stock price was above $13.65—will
simply be cancelled.
"Upon closing of this proposed transaction, which is subject to
shareholder approval and other customary closing conditions, Dell will be
owned by Michael and Silver Lake, and shares of Dell will no longer be
traded publicly," the e-mail to employees said. While the company will
"continue to offer market-competitive compensation," the change means that
Dell's previously stock-heavy incentives for employees will have to be
converted to something else. And that means employees who hold a stake in
the company right now—or the promise of one—will be left with
significantly less than they may have hoped for.
That's part of a continuing theme for Dell employees who had bought into
the promise of working for a publicly traded company. In October, Dell
forced some employees who had heavily invested in Dell stock as part of
their 401k plans to sell off that stock at $9 a share—a move based on a
The use of stock options by corporations to reward employees—and
executives in particular—has long been controversial. Michael Dell and
other corporate executives made millions off of stock options in the 1990s
and the first half of the last decade—in part because of long-running
accounting fraud that
covered up kickbacks from Intel for exclusively using its processors.
But as the company has used stock and cash to acquire other companies to
create its software and enterprise services businesses over the past six
years, many of those employees who came onboard in the process have ended
up with stock options they couldn't use—because they were issued when
Dell's stock was high but vested after the stock had descended. And as
Dell moves to go private, those who held on to "underwater" options in the
hopes of a better future are cut out of the deal.
employees who got performance options when the company's stock was over
$13.65, those options get converted to a hearty handshake.
And those options aren't insignificant. In 2009, Dell took an expense of
$106 million to accelerate the vesting of stock options it had given to
employees that were underwater—options for 20.9 million shares that had
been issued to employees with an average exercise price of $22.03 a share.
If they had been exercised, they would have amounted to more than 1
percent of Dell's outstanding shares—shares Dell would have had to buy
back from investors to award to employees.
Dell employees who were awarded Restricted Stock Units (RSUs) as part of
their compensation will get some cash out of the buyout—but
probably not what they had expected. RSUs will be converted to cash if the
deal goes through, but they will still be locked into Dell's vesting plan.
That means that in five years, if Dell goes public again at a higher stock
value, those who had RSUs will still just get paid out at $13.65 per
When asked about the changes, a Dell spokesman referred to the
company's SEC filings, in which it said details on new long-term
incentive programs and other compensation would be finalized after the
deal is complete. "Our intent is for all of our team members to feel that
the new program is equal to or better than the prior programs," Dell said
in its public message to "team members."
Sean Gallagher / Sean is Ars Technica's IT
Editor. A former Navy officer, systems administrator, and network
systems integrator with 20 years of IT journalism experience, he lives
and works in Baltimore, Maryland.
This project was conducted as part of
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