You own stock in Fred’s Fanny Shop, which is going to merge with Beth’s Blasphemous Bon Bons. You didn’t want this merger to happen (in fact, you gave it a no-go when a shareholder vote was taken). Further, you’re being told that in this transaction, your stock in Fred’s is being valued so as to be worth a dollar a share. You swear that the value should be higher.
In this instance, you’ll refer to your appraisal rights, which are your rights as a stockholder in a corporation that is merging with or being bought out by another corporation. That is, you have the right to bring in your own expert and have that banker give a fairness opinion as to the fairly appraised value of your assets in the transaction.
Minority shareholders can, by law, ask that a company that is not affiliated with Fanny’s or Fred’s determine the value of stock. This presumably much higher price, as opposed to the crappy price that you were originally approached with, will then be used in the merger, essentially defending the value of your investment in Fred's.
In other words, this is a legal method of protecting you from getting screwed.
Related or Semi-related Video
Finance: What is Counterparty Risk?9 Views
Finance a la shmoop what is counterparty risk?
alright here's you the party and here's the guy you're contracting with to sell [Woman and man stood side by side]
18 tons of bricks or buy a line of credit for your flower shop or sell a
futures contract with the right to buy oil at 80 bucks a barrel for the next [Person signs contract]
two years so you're the party and he's the counterparty and the yin and yang of
the party and here's the risk yeah well the counterparty risk is just
that the person you contracted with doesn't live up to their end of the
bargain you pay them good money you sign a good contract all lawyered up and [Stack of money and contract appears]
stuff and then they split like totally split disappeared sea men choose the
bottom of the ocean maybe they went to Bora Bora
maybe they got facial surgery in the Philippines you know they do that now [George Clooney in a surgical bed]
well when that happens you will probably feel like crying and you should its your
counterparty you can cry if you want to come on that was a good reference people [Man singing]
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