/>iPalkon v. Maffei, 311 A.3d 255 (Del. Ch. 2024),cert. denied, No. 2023-0449-JTL, 2024 WL 1211688 (Del. Ch. Mar. 21, 2024) involved a challenge to the proposed reincorporation of TripAdvisor, Inc. from Delaware to Nevada. Vice Chancellor J. Travis Laster took injunctive relief "off the table", he did allow the case to move forward. As I noted in this post, that left open the question of how damages should be determined should the plaintiffs prevail. The Vice Chancellor's answer was to look at the stock price impact:
But there is another way to get at the delta. The Company's stock has a trading price. In the conversion, nothing will change except the Company's corporate domicile. Maffei's control will remain constant. The Company's business will remain constant. The only independent variable is the law governing its internal affairs.
Given that set-up, the change in the Company's trading price should help quantify the harm, if any, caused by the conversion. As long as the market for the Company's common stock is semi-strong-form efficient, then the price reaction should be indicative. Note that the stock price need not fairly approximate a pro rata share of the Company's intrinsic value for the price reaction to matter. As long as any pricing disconnects remains consistent across variables other than the governing law, the price impact should provide insight.
Yesterday I wrote about a proposal by The Trade Desk to reincorporate from Delaware to Nevada. The company's preliminary proxy materials include a lengthy memorandum authored by Professor Steven Davidoff Solomon that analyzes a number of legal issues with respect to the proposal. Among other things, the memorandum concludes that academic studies do not support a Delaware premium and Professor Solomon's own empirical analysis supports the view that companies reincorporating from Delaware to another jurisdiction suffer a "negative premium". If these conclusions are correct, then a plaintiff may be unable to prove damages under Vice Chancellor Laster's theory even should the plaintiff prove that a board breached its fiduciary duties in deciding to reincorporate.
