M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Thursday, September 13, 2018

The nonsensical market out in appraisal

Just got to thinking about appraisal's market out exception and it strikes me that it doesn't make much sense. Sure, sure, students have a tough time reading and then understanding the statutory provision (thanks drafters). But I mean something different. If you receive stock in a publicly traded corporation or in stock of the acquirer, then no appraisal rights for you. If you receive cash for your stock, you get appraisal rights. Ok. But, the appraisal remedy was originally adopted at a time when consideration in mergers was mostly stock. Dissenting stockholders who didn't want the stock of the acquirer at the exchange ratio agreed to in the merger were given the right to be cashed out - to receive the value of their stock in cash money. So, modern appraisal statutes seem to get this exactly backwards. If you receive stock, no appraisal. If you receive cash (something other than stock of the surviving corporation or publicly traded stock), you have rights. 

Now that we live in the merger price as fair value era, it strikes me that we've moved very far away from appraisal's original intent into a weird place. I wonder whether it's even worth it.

See, now that I'm no longer an Associate Dean you get these random corporate law thoughts.



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