We've already discussed the unfortunate (to put it mildly) legislation proposed by the Delaware state bar to ban fee shifting bylaws and charter provisions. It turns out that the bill's got still more problems:
Delaware corporations and their advisers have been eagerly awaiting the response of the Delaware legislature to the recent surge in appraisal arbitrage and judicial pronouncements allowing this activity and suggesting that lawmakers should step in if they perceive a problem. It now appears based on a proposal released by the Delaware Corporation Law Council that the legislature may act as soon as this week. If the lawmakers follow the recommendations of the Council (which they usually do) the changes will likely disappoint Delaware corporations, make mergers and acquisitions in that important state more difficult, reduce deal flow, and lead to lower prices being paid to selling shareholders. The beneficiaries of this legislation will be the small (but growing) group of short term speculators specializing in appraisal arbitrage and the advisors who support that industry. ...
It has been reported that billions of dollars are now devoted to appraisal arbitrage, and with the blessing of the courts in Delaware and soon perhaps the legislature as well, it is likely that even more transactions will be subjected to appraisal claims. As a result, corporate acquirers will have to resort to self-help if they want to know in advance how much an acquisition is going to cost them (which is always important but especially critical in leveraged transactions). This self-help may take the form of the appraisal closing conditions suggested by the Council, or differential pricing (such as an automatic price reduction if too many shareholders assert appraisal). More likely it will just mean lower acquisition prices being offered to all shareholders, as buyers now know they will have to contend with a new category of hold-up artists. Some companies with near-term contingences they would like to derisk may find it hard to sell themselves at all. It is difficult to see how this shift of value from shareholders as a whole to a small group of short-term speculators is socially advantageous or in the best interests of State of Delaware.
Kindly go read the whole thing.