Emory Law Journal


Celia Golod


Appraisal is a legislatively created right that affords a shareholder the ability to seek a judicial ruling on the fair value of their stock when their corporation undergoes a merger that they do not support. While this remedy is intended to protect shareholders from faulty merger negotiating, in the 2010s hedge fund petitioners in Delaware flooded the Delaware Chancery Court to use the remedy to make a profit—a tactic called appraisal arbitrage. While appraisal arbitrage theoretically acts as a back-end market check on controller abuses, appraisal litigation is lengthy and requires court resources. Further, appraisal arbitrage allows hedge fund petitioners, many of whom purchased shares of a target corporation after the merger announcement, to profit needlessly.

In response to increased appraisal litigation in the late 2010s, the Delaware legislature reacted with new statutory solutions, and the Delaware Supreme Court issued three critical opinions; all in an attempt to curb appraisal arbitrage in the Delaware Chancery Court. While these actions seem to limit the aggregate number of appraisal cases in the Delaware courts and influence the outcome of appraisal decisions, two recent Delaware Chancery Court decisions indicate that appraisal arbitrage has not quite left Delaware. This Comment focuses on the history of Delaware’s appraisal statute and its use by appraisal arbitrageurs. Through analysis of the rise of appraisal arbitrage, the efforts from the Delaware legislature and Supreme Court to curb it, and two recent Delaware Chancery Court decisions, this Comment argues that appraisal arbitrage still plagues Delaware.

This Comment asserts that Delaware must overturn a 2007 Chancery Court decision that allows shareholders who bought shares of a company undergoing a merger after the transaction’s record date to claim appraisal rights even though they may not have voted with those shares. Moreover, the Delaware legislature must codify this change and amend its appraisal and merger statutes to correct a share-tracing problem that the 2007 decision resolved. Through these measures, Delaware can keep appraisal arbitrage out of its courts while maintaining the spirit of the appraisal remedy.