January 8, 2014 Forum Report: Eligibility for Support of Marketable Dell Appraisal Rights

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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.

The following clarification of the report below was distributed to Forum participants on January 10, 2013.

Subject: Confirming eligibility for support of marketable Dell appraisal rights

Responding to questions about the process for confirming eligibility for support of marketable Dell appraisal rights, addressed in Wednesday’s Forum report (below), these are the current provisions:

Any participant in the Trust or the Forum’s program can ask for written confirmation of either its eligibility as an investor or the eligibility of specified appraisal rights.
The participant will then be able to provide the written confirmation to anyone it wants to inform, with whatever confidentiality conditions it wants to establish.
The Trust will respond to a request from anyone for verification of a presented written eligibility confirmation.

This will allow the participant to control the disclosure of information about its interests in the Trust, consistent with Forum and Trust privacy policies.

Importantly, it will also allow anyone considering a transaction or relationship with a presumed Trust participant to simply request a written confirmation of eligibility, knowing that written evidence can be readily provided and verified.

Please let me know if you have any questions about this. I will of course also welcome suggested refinements to address the interests of both participants and anyone wishing to work with them.

- GL

For a printable copy of this report, click here.

Forum Report: Dell Valuation and Appraisal Rights Investments

Eligibility for Support of Marketable Dell Appraisal Rights

Responding to the concerns of existing participants in the Dell Valuation Trust as well as investors with broader interests in the orderly use of appraisal rights, the Trust will be accepting new requests for support of marketable Dell appraisal rights only from existing participants in either the Trust or the Forum’s program addressing broader appraisal rights applications.

Other investors will have access to Trust support of their Dell appraisal rights through the eligible participants, by arranging either endorsements or assignments of the rights. For public pension funds and individual investors, the Forum will assure the availability of endorsement arrangements at no cost. Private fund managers should of course be able to arrange their own commercially reasonable endorsements or sales.

Anyone wishing to confirm the eligibility of a participant, or the availability of support for specified appraisal rights, can address the request to me or to the Trust’s attorneys (by email: dell-vt@shareholderforum.com).

This policy refinement is intended to protect both Trust participants and the marketplace from two types of unfair “free rider” exploitation:

Considering the level of confusion about appraisal rights among investors as well as supposed experts, uninformed or misinformed investors can impose significant costs on the Trust, and thus on all its participants. For example, incorrectly processed demands of one investor can require Trust responses to status challenges and threaten the viability of a portion of the supported rights. More generally, participants that have made commitments to understanding appraisal rights may question the fairness of providing Trust educational support to those who had not made such commitments.

Allowing a non-participating investor to use the availability of Trust support for marketability to negotiate a sale or settlement does not benefit the investors who are actually sharing the costs of the Trust’s marketability support. It could also be unfair to the party being bluffed, of course. Establishing eligibility requirements – and offering to confirm an investor’s status – should limit this abuse.

Your suggestions of further policy refinements will be welcomed.

GL – January 8, 2014

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.