The Shareholder Forumtm

support of long term investor interests in

Appraisal Rights


Intrinsic Value Realization




The Delaware Supreme Court issued a ruling on December 14, 2017 that endorsed its interpretation of the "Efficient Market Hypothesis" as a foundation for relying upon market pricing to define a company’s “fair value” in appraisal proceedings. The Forum accordingly reported that it would resume support of marketplace processes instead of judicial appraisal for its participants' realization of intrinsic value in opportunistically priced but carefully negotiated buyouts. See:

December 21, 2017 Forum Report

 Reconsidering Appraisal Rights for Long Term Value Realization



Forum reference:

Delaware Supreme Court decides market price is the same as intrinsic value for purposes of appraisal rights


In the decision reported in the article below, the Delaware Supreme Court presented the following explanation of its position that an appraisal of a long term investment's "fair value" can be based on "fair price" established by willing sellers (page 44; PDF p.46):

In economics, the value of something is what it will fetch in the market. That is true of corporations, just as it is true of gold.  Thus, an economist would find that the fair market value of a company is what it would sell for when there is a willing buyer and willing seller without any compulsion to buy. And, outside of the appraisal context, this Court has often embraced these concepts of value: “[I]n many circumstances a property interest is best valued by the amount a buyer will pay for it. . . . a well-informed, liquid trading market will provide a measure of fair value superior to any estimate the court could impose.” [footnotes omitted]

For the referenced decision, see


Source: Law360, August 1. 2017 article

Del. Justices Reverse Appraisal Of $1.3B DFC Global Buyout

By Matt Chiappardi

Law360, Wilmington (August 1, 2017, 4:02 PM EDT) -- The Delaware Supreme Court on Tuesday overturned the Chancery Court’s determination that payday lender DFC Global Corp.’s private-equity buyer underpaid by about $100 million in its $1.3 billion acquisition, but refused to create a broad judicial rule that deal price is the best indication of fair value in appraisal actions.

The 87-page opinion penned by Chief Justice Leo E. Strine Jr. did state that in the DFC Global case, the best evidence of fair value for the stock was indeed the deal price Lone Star Fund VIII paid for it, but that finding is suggested by the specific economic conditions surrounding the merger.

The justices, however, rejected arguments from DFC Global that the state Supreme Court should find that in all cases in which there is a trouble-free transaction, it ought to be presumed in appraisal actions that deal price is the best estimate of fair value.

“We decline to engage in that act of creation, which in our view has no basis in the statutory text, which gives the Court of Chancery in the first instance the discretion to ‘determine the fair value of the shares’ by taking into account ‘all relevant factors,’” Chief Justice Strine wrote. “Until the General Assembly wishes to narrow the prism through which the Court of Chancery looks at appraisal value in specific classes of mergers, this court must give deference to the Court of Chancery if its determination of fair value has a reasonable basis in the record and in accepted financial principles relevant to determining the value of corporations and their stock.”

How the Delaware justices would rule on the issue of deal price has piqued the interest of the mergers and acquisitions bar, as there has been a lively debate over how it ought to factor in the Chancery Court’s appraisal determinations against a backdrop of a growing number of opinions giving deference to the transaction value.

But the state Supreme Court squelched any idea that it would stray from its 2010 ruling in Golden Telecom Inc. v. Global GT LP, widely seen as the operative precedent tasking Chancery judges with performing an independent analysis in appraisal cases.

“Capitalism is rough and ready, and the purpose of an appraisal is not to make sure that the petitioners get the highest conceivable value that might have been procured had every domino fallen out of the company’s way; rather, it is to make sure that they receive fair compensation for their shares in the sense that it reflects what they deserve to receive based on what would fairly be given to them in an arm’s-length transaction,” Chief Justice Strine wrote.

The justices did take DFC Global to task for raising the issue of whether deal price should be presumptive of fair value only at the appellate stage and only presenting to the Chancery Court that it should receive “significant weight” in an analysis.

That made the issue “not properly presented,” and Chief Justice Strine wrote that the justices were “reluctant” to even address it, but did so because it bore some relationship to case-specific issues.

“We place great value on the assessment of issues by our trial courts, and it is not only unwise, but unfair and inefficient, to litigants and the development of the law itself, to allow parties to pop up new arguments on appeal they did not fully present below,” the chief justice wrote.

With the issue remanded, the case does, nonetheless, have a chance of ultimately breaking in DFC Global’s favor.

When Chancellor Andre G. Bouchard made his appraisal determination in September, he ruled that DFC Global’s stock was undervalued by the market in part because of an uncertain regulatory environment clouding the payday-lending sector, and he valued the company’s shares in an analysis that gave equal weight to three factors — a discounted cash flow analysis from the company’s expert, his own analysis and the actual market price.

The Supreme Court ruled that the chancellor gave no explanation for why he weighed those factors in that manner and that his remand opinion, if it weighs disparate factors again, must provide the reasoning.

The justices also agreed with DFC Global’s argument that Chancellor Bouchard’s position that regulatory uncertainty would make a market check of the company’s value unreliable was “not rationally supported by the record.”

“The Court of Chancery did not cite, and we are unaware of, any academic or empirical basis to conclude that market players like the many who were focused on this company’s value would not have examined the potential for regulatory action and factored it in their assessments of the company’s value,” Chief Justice Strine wrote.

Representatives for the sides did not immediately respond to requests for comment Tuesday.

DFC Global is represented by Raymond J. DiCamillo and Matthew D. Perri of Richards Layton & Finger PA, and Meryl L. Young, Colin B. Davis and Joshua S. Lipshutz of Gibson Dunn & Crutcher LLP.

The petitioners are represented by Stuart M. Grant and Kimberly A. Evans of Grant & Eisenhofer PA.

The appellate case is DFC Global Corp. v. Muirfield Value Partners LP, et al., case number 518, 2016, in the Delaware Supreme Court.

The lower court case is In re: Appraisal of DFC Global Corp., case number 10107, in the Delaware Court of Chancery.

Additional reporting by Jody Godoy and Jeff Montgomery. Editing by Jack Karp


© 2017, Portfolio Media, Inc.


The program supporting Appraisal Rights Investments was conducted by the Shareholder Forum for invited participants according to stated conditions, including standard Forum policies that each participant is expected to make independent use of information obtained through the Forum and that participant identities and views will not be reported without explicit permission..

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.