Tag Archives: Leveraged buyout

Michael Dell Bought His Company Too Cheaply

By Matt Levine – Appraisal is a weird bit of corporate law, because it undermines the usual nice clean process of deciding how much a stock is worth by just seeing what someone will pay for it.

In 2012, with the “market not getting” Dell and valuing it at just $9.35 a share, Michael Dell rounded up some financing sources and offered to pay about $12 or so for it. Eventually. Michael Dell and his private-equity backers at Silver Lake ended up paying about $13.75 a share ($13.96 counting some dividends) in a $25 billion deal that they signed in February 2013 and closed in October of that year.

Then some shareholders sued in an appraisal lawsuit, arguing that the $13.75 was too low and that a Delaware court should award them more money.

On Tuesday (May 31) Delaware Vice Chancellor Travis Laster ruled on the remaining appraisal claims and found, in a 114-page opinion, that Dell was really worth $17.62 a share, so everyone who successfully sued — and managed to jump through the correct hoops — is entitled to an extra $3.87 a share, with interest.

To get there, first of all, Vice Chancellor Laster had to disregard the market price for the stock, which was $9.35 when the deal was first proposed, $13.42 when it was officially signed, and never closed above $14.51 afterward.

The market price didn’t reflect fair value, not because the market didn’t have the relevant information, but because it weighted it incorrectly. Analysts had a myopic “focus on short-term, quarter-by-quarter results,” and couldn’t understand the long-term value of the company’s plan. more> http://goo.gl/vISqXO