Dell, Inc. v. Magnetar Global Event Driven Master Fund Ltd.

In the early 2010s, the outlook on the personal computer (PC) market was highly uncertain. Dell, Inc. (Dell) (defendant) was a mature company in the PC industry, and it faced stiff competition from newer PC makers. Michael Dell was the company’s chief executive officer and owned about 15% of Dell’s stock. The market for Dell’s stock was semi-strong efficient, meaning that its stock price would quickly reflect relevant publicly available information. In June 2012, the company was on the brink of a crisis, its stock price having dropped from $18 to $12 per share. Michael Dell began exploring the possibility of a management-led buyout transaction (MBO), which received positive feedback from a private-equity firm and eventually a committee of the board of directors and the board. The sales process leading to a deal encompassed (1) pre-signing canvassing of possible bidders; (2) a go-shop period, during which 67 potential bidders were contacted; (3) a period of additional price adjustments, leading to a $13.75-per-share merger-deal price; and (4) shareholder approval. Some shareholders (the dissenters) (plaintiffs) demanded an appraisal. Voluminous evidence was presented at the appraisal trial, including discounted-cash-flow (DCF) analyses prepared by the parties’ respective experts that yielded valuations of $28.61 and $12.68 per share. The trial court finally valued Dell at $17.62 per share based on its own DCF analysis. In doing so, the court stated that it was placing no weight on Dell’s deal price for various reasons relating to supposed flaws in the sales process. The dissenters appealed.