Emory Law Journal


In a pair of momentous decisions involving stockholder appraisal rights, the Delaware Supreme Court made four critical mistakes in analyzing the financial ideas and concepts at play. First, the Court ignored the differences between how public markets price risk and how private parties¿particularly financial sponsors¿price risk. Second, the Court took the well-supported evidence of information efficiency in securities markets as necessarily implying a high degree of value efficiency. It then compounded this error by attributing this value efficiency not simply to the securities market but also to the deal market. Third, the Court succumbed to a flawed analogy between the fiduciary duty and appraisal contexts, implying that conditions of pricing efficiency are met whenever directors satisfy their minimum fiduciary obligations. Fourth, the Court treated company valuation as a mechanical calculation, downplaying the role of human judgment. This Article analyzes these errors and considers some implications for the future.