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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.

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 accordingly 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.


Forum reference:

Professional view that marketing benefit of demonstrating responsibility may be more valuable than cost of error



Source: June 14, 2016 IR Magazine article

How T Rowe Price made lemonade out of lemons

June 14, 2016 | By Jeffrey Goldberger

The mutual mega-fund turned an error into an IR win

Historically, the ‘little guy’, the individual investor, has received the short end of the stick when it comes to Wall Street. From painfully overpaid CEOs to costly trading mistakes and disappointing earnings, individual investors have rarely been properly compensated for actions that have caused them to lose money. While we have recently witnessed an uptick in regulatory activity and success in prosecuting these cases, one would be hard-pressed to argue that the proceeds of these fines will quickly make their way into the accounts of investors.

So when I read earlier this week that Baltimore-based T Rowe Price, one of the largest mutual fund companies with assets under management of $764.6 bn in the US, was going to – wait for it – deposit $194 mn in the accounts of its clients to compensate them for a clerical error made in connection with Dell’s management buyout in 2013, I nearly fell off my chair.

You heard it right: one of Wall Street’s largest fund managers not only admitted its mistake but was also doing its best to make amends. Talk about turning lemons into lemonade!

While the payment will result in a one-time charge to earnings in the second quarter of 2016, only time will tell whether this shareholder-friendly action turns out to be the smartest investment the firm has ever made. By doing the right thing in returning capital to those investors who were directly negatively affected by the clerical error, T Rowe Price is in effect saying that its investors – both large and small – are important.

It has also put its peers on notice, almost challenging them to raise their game when it comes to disclosure and accountability. For shareholders of T Rowe Price’s publicly traded shares, while a hit to earnings is never good, it removes any uncertainty as it pertains to potential future exposure. And with more than $1.9 bn of cash on-hand, it’s clear this action isn’t going to put T Rowe Price out of business.

As William Stromberg notes in a press release, ‘T Rowe Price has a long history of putting our clients’ interests first, and that is what we are doing here. By compensating our clients based on the court’s May 31, 2016 ruling, clients will come out ahead compared with how they would have fared had they taken the merger consideration.’

While I doubt Baltimore is going to plan a parade downtown or give Stromberg a key to the city, as an investor relations professional for more than 20 years, I’m tossing some virtual confetti in the air as I write this. I wish more companies – regardless of industry or market cap – spent less time trying to game the system and line their pockets and more time acting in the best interests of shareholders.

As William Katz, a banking analyst from Citigroup, notes in the Wall Street Journal in reaction to T Rowe’s actions: ‘It does affect the brand a little bit, but that is offset by the notion that [it is] making good by [its] clients.’

Who would have thought something as tart as lemons (adversity), when combined with a little sugar (taking responsibility) and water (the elixir of life), would result in a satisfying refreshment (positive outcome)? I’ll toast to that!

Jeffrey Goldberger is managing partner at consultancy KCSA Strategic Communications


Copyright IR Media Group Ltd. 1995 - 2016



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.

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