The Long Rise and Quick Fall of Appraisal Arbitrage

Abstract

Appraisal is a legislatively created right for shareholders to seek a judicial determination of the fair value of their stock in certain transactions. For many decades, appraisal was a little used, frequently maligned, corporate law remedy. Beginning at the turn of the 21st century, this all changed when a group of financial investors, including several hedge funds, began filing appraisal cases. Appraisal arbitrage, as it became known, grew rapidly in popularity.

Keywords: Delaware corporate law, shareholder litigation, appraisal arbitrage, Delaware appraisal amendments, mergers and acquisitions, appraisal, and valuation methods

JEL Classification: G23, K22