Delaware Ruling Raises Doubts About Appraisal Arbitrage in Courts (1)

A Delaware Supreme Court ruling that only slightly raised the value of ArubaNetworks Inc. share price after it merged with Hewlett-Packard Co. raises new questions for shareholders about the profitability of appraisal cases in Delaware, court watchers say.

The ruling seems to indicate that appraisal arbitrage—investors suing for a better share price after a deal is done—is a “dead end” in arms’ length deals, said Lawrence Hamermesh, a law professor at Widener University.

The ultimate lesson is that “appraisal is going to be driven by market measures and not expert testimony,” he said April 17. In the past, shareholders have ...