Court of Chancery Reaffirms Possibility of “Buying Into” an Appraisal Claim
Over the last several years, there has been a rise in so-called “appraisal arbitrage” – funds buying stock of a target company after announcement of a merger in order to pursue appraisal claims. Resulting litigation has raised the question of whether such “arbitrageurs” have standing to pursue an appraisal claim if they cannot demonstrate that the purchased shares were not voted in favor of the merger. Such a tracing requirement would be difficult to fulfill, given that most shares today are held by a stock depository. In two recent decisions, Ancestry and BMC, the Delaware Court of Chancery confirmed that there is no requirement that an appraisal petitioner prove that previous owners of the appraisal shares refrained from voting in favor of the merger.
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