We talked last week about appraisal arbitrage, the strategy in which hedge funds buy stock in companies that have announced mergers, vote against the mergers, and then sue in Delaware court to get a court to give them the fair value of their stock. Often, in the not-too-distant past, the court calculated a fair value that was a lot higher than the deal price, and so this strategy could be very profitable. But then Delaware Vice Chancellor Travis Laster issued a shocking shrug of an opinion in the appraisal litigation over Hewlett-Packard Co.’s acquisition of Aruba Networks Inc., figuring that the stock market knew how to value Aruba, and that it had valued Aruba at $17.13 per share, so he was going to use that value as the amount to award in the appraisal.
Read more at Bloomberg View