back to article Say goodbye to a chunk of that sweet Aruba payout, hedgies – judge

Hedge funds wanting a court-ordered higher share price from HP when it acquired Aruba have been dealt a blow costing them $17.3m. HP bought wireless networking supplier Aruba for $2.8bn in May 2015, paying $24.67/share. There were no other bidders and lawsuits were filed by stockholders arguing HP should have paid a higher …

  1. Doctor Syntax Silver badge

    "That $17.13/share gets them $39.2m, some $17.3m less than the $56.5m they would have netted at the $24.67/share deal price."

    I hope that price only applies to the plaintiffs, not the rest of the shareholders. If it does apply to the rest then maybe they'll sue the plaintiffs for the difference.

    1. Jon 37

      It only applies to the plaintiffs.

      Investors had the choice of selling to HP at the offered price, or dragging them through court to get a "fair" price set by the court. Most of them sold to HP. The hedge funds gambled on the court route, and lost.

      1. Anonymous Coward
        Anonymous Coward

        Please tell me the lawyers were on a no win, no fee deal?

        1. Anonymous Coward
          Anonymous Coward

          Yes, they were. That's generally how this law firm operates

        2. Anonymous Coward
          Anonymous Coward

          Please tell me the lawyers were on a no win, no fee deal?

          Who cares? I actually had hoped they would get paid anyway - f'ing hedgies...

  2. Nick Kew Silver badge

    I don't understand

    If the price was $24.67 per share, presumably that was agreed between buyers and sellers. The latter by voting on a Special Resolution, or something of that nature.

    How does a judge then set a price that is any different - either higher or lower - than that agreed?

    Surely that can only happen if someone argues successfully that there was some kind of skulduggery in setting the original price. Presumably the hedgies had some such argument? But then the decision for the judge would be to accept or reject their case?

    Did HP claim successfully they'd been hoodwinked? They do seem to have a bit of a track record, as in the bizarre story of when they borged Autonomy. Or is this a judge playing God and overriding the market?

    [edit] Thanks to Jon 37 for what looks like a good summary explanation.

    1. a_yank_lurker Silver badge

      Re: I don't understand

      The hedgies sued claiming the offer was too low. The court then evaluates, based on a decision by the Nine Seniles, what the fair market price should be, likely to be different number than the offered price. If it is higher, HP forks over more money. But if lower, they lose money on the deal.

    2. Anonymous Coward
      Anonymous Coward

      Re: I don't understand

      recent rulings in Dell & DFC, and now Aruba, seem to indicate the Chancery is trying to shut down, or at least slow down, appraisal cases. Relying on simply the 30-day moving average as "fair-value" is pretty ridiculous imo. So there's a bit of playing God involved

      Verition's experts argued that the deal price was too low, based on their expert's Discounted Cash Flow valuation. The judge admitted the valuation was fundamentally sound and in-line with court precedent but rejected it primarily because one input into this valuation did not make rational sense despite being "fundamentally" correct (a beta of less than 1 for a high growth tech company)

      HP didn't make any arguments in this case, but they felt they got a deal. There's a different standard of value at play here. In the appraisal case, one looks at the fair value of Aruba on a standalone basis. From HP's perspective, they're looking at the value of Aruba to HP specifically, which will include hundreds of millions of dollars worth of synergies (not included in the standalone valuation)

  3. Adrian 4 Silver badge

    I'm not sure you have to be God to override the market, whatever the financial wallahs might think. It's sufficient to be the Law, and a judge is definitely in the right area there.

  4. Lugh729

    Your calculation of what the hedge fund lost ($17mm) doesn't include statutory interest. It's quite high in Delaware, 6% for about three years reduces this figure substantially

  5. cs9

    An expert's DCF valuation isn't worth the paper it's written on.

    Valuation guru Aswath Damodaran has a history of making well-researched, well-reasoned and well-argued DCF valuations which turned out to be complete nonsense in hindsight.

    Here's one from 2012 where he predicted Facebook was worth less than $75b, a far cry from today's valuation of > $515b.

    http://aswathdamodaran.blogspot.com/2012/02/ipo-of-decade-my-valuation-of-facebook.html

    Shortly after Google's IPO he reasoned they were worth about $100 a share, somehow overlooking about 90% of that company's value. This isn't just some random bozo he is one of the leading influencers in the field.

    30 day MA is a fact, everything else is an opinion. And you can buy any opinion you want.

    If these hedge gurus knew Aruba was worth a lot more than the market was paying they should have backed up the truck and bought everything they could afford. That way the HP premium would have paid handsomely and no need for a lawsuit.

  6. ecofeco Silver badge

    But I was robbed my lord!

    No you weren't. You was stupid.

  7. Anonymous Coward
    Anonymous Coward

    Aruba bust it's ass trying to get the market to value it (correctly imho) higher to absolutely no avail. I laughed when I saw some of the shareholders saying HPs deal undervalued it. The market had spoken loud and clear.

  8. Anonymous Coward
    Anonymous Coward

    Somebody

    Lend me a tenner. NO, fuck off then and stop harassing me

  9. TheDillinquent

    Couldn't happen to more deserving scum...

    Its about time these hedge fund clowns learnt the basics of gambling - sometimes you lose - and no amount of slimy lawyers is going to change that.

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