Dell, Inc. v. Magnetar Global Event Driven Master Fund Ltd , 177 A.3d 1 ( 2017 )


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  •           IN THE SUPREME COURT OF THE STATE OF DELAWARE
    DELL, INC.,                               §
    §
    Respondent-Below,             §
    Appellant/Cross-Appellee,     §   No. 565, 2016
    §
    v.                                   §   Court Below:
    §
    MAGNETAR GLOBAL EVENT DRIVEN              §   Court of Chancery
    MASTER FUND LTD; MAGNETAR                 §   of the State of Delaware
    CAPITAL MASTER FUND LTD;                  §
    GLOBAL CONTINUUM FUND, LTD;               §   Consolidated C.A. No. 9322-VCL
    SPECTRUM OPPORTUNITIES MASTER             §
    FUND LTD.; MORGAN STANLEY                 §
    DEFINED CONTRIBUTION MASTER               §
    TRUST; BLACKWELL PARTNERS LLC;            §
    AAMAF, LP; WAKEFIELD PARTNERS,            §
    LP; CSS, LLC; MERLIN PARTNERS, LP;        §
    WILLIAM L. MARTIN; TERENCE                §
    LALLY; ARTHUR H. BURNET;                  §
    DARSHANAND KHUSIAL; DONNA H.              §
    LINDSEY; DOUGLAS J. JOSEPH ROTH           §
    CONTRIBUTORY IRA; DOUGLAS J.              §
    JOSEPH & THUY JOSEPH, JOINT               §
    TENANTS; GEOFFREY STERN; JAMES            §
    C. ARAMAYO; THOMAS RUEGG;                 §
    CAVAN PARTNERS LP; and RENE A.            §
    BAKER,                                    §
    §
    Petitioners-Below,            §
    Appellees/Cross-Appellants.   §
    Submitted: September 27, 2017
    Decided:   December 14, 2017
    Before STRINE, Chief Justice; VALIHURA, VAUGHN, and TRAYNOR,
    Justices; and LeGROW, Judge  constituting the Court en Banc.
    Upon appeal from the Court of Chancery. REVERSED in part, AFFIRMED in
    part, and REMANDED.
    Gregory P. Williams, Esquire (argued), John D. Hendershot, Esquire, Susan M.
    Hannigan, Esquire, and Andrew J. Peach, Esquire, Richards, Layton & Finger, P.A.,
    Wilmington, Delaware. Of Counsel: John L. Latham, Esquire, and Susan E. Hurd,
    Esquire, Alston & Bird LLP, Atlanta, Georgia; Gidon M. Caine, Esquire, Alston &
    Bird LLP, East Palo Alto, California; and Charles W. Cox, Esquire, Alston & Bird
    LLP, Los Angeles, California, for Appellant/Cross-Appellee Dell Inc.
    Stuart M. Grant, Esquire (argued), Michael J. Barry, Esquire, Christine M.
    Mackintosh, Esquire, and Rebecca A. Musarra, Esquire, Grant & Eisenhofer P.A.,
    Wilmington, Delaware, for Appellees/Cross-Appellants Morgan Stanley Defined
    Contribution Master Trust; AAMAF, LP; CSS, LLC; Merlin Partners, LP; William
    L. Martin; Terence Lally; Arthur H. Burnet; Darshanand Khusial; Donna H.
    Lindsey; Douglas J. Joseph Roth Contributory IRA; Douglas J. Joseph & Thuy
    Joseph, Joint Tenants; Geoffrey Stern; James C. Aramayo; Thomas Ruegg; and
    Rene A. Baker.
    Samuel T. Hirzel, II, Esquire (argued), and Melissa N. Donimirski, Esquire, Heyman
    Enerio Gattuso & Hirzel LLP, Wilmington, Delaware. Of Counsel: Lawrence M.
    Rolnick, Esquire, and Steven M. Hecht, Esquire, Lowenstein Sandler LLP, New
    York, New York, for Appellees/Cross-Appellants Magnetar Global Event Driven
    Master Fund Ltd; Magnetar Capital Master Fund Ltd; Global Continuum Fund Ltd;
    Spectrum Opportunities Master Fund Ltd; Blackwell Partners LLC; and Wakefield
    Partners LP.
    VALIHURA, Justice:
       Sitting by designation pursuant to Del. Const. art. IV § 12.
    The petitioners left standing in this long-running appraisal saga are former
    stockholders of Dell Inc. (“Dell” or the “Company”) who validly exercised their appraisal
    rights instead of voting for a buyout led by the Company’s founder and CEO, Michael Dell,
    and affiliates of a private equity firm, Silver Lake Partners (“Silver Lake”). In perfecting
    their appraisal rights, petitioners acted on their belief that Dell’s shares were worth more
    than the deal price of $13.75 per share—which was already a 37% premium to the
    Company’s ninety-day-average unaffected stock price.
    Our appraisal statute, 
    8 Del. C
    . § 262, allows stockholders who perfect their
    appraisal rights to receive “fair value” for their shares as of the merger date instead of the
    merger consideration. The appraisal statute requires the Court of Chancery to assess the
    “fair value” of such shares and, in doing so, “take into account all relevant factors.” The
    trial court complied: it took into account all the relevant factors presented by the parties in
    advocating for their view of fair value—including Dell’s stock price and deal price—and
    then arrived at its own determination of fair value.
    The problem with the trial court’s opinion is not, as the Company argues, that it
    failed to take into account the stock price and deal price. The trial court did consider this
    market data. It simply decided to give it no weight. But the court nonetheless erred because
    its reasons for giving that data no weight—and for relying instead exclusively on its own
    discounted cash flow (“DCF”) analysis to reach a fair value calculation of $17.62—do not
    follow from the court’s key factual findings and from relevant, accepted financial
    principles.
    1
    “When reviewing a decision in a statutory appraisal, we use an abuse of discretion
    standard and grant significant deference to the factual findings of the trial court. This Court
    ‘will accept [the Court of Chancery’s] findings if supported by the record . . . .’”1 We defer
    to the trial court’s fair value determination if it has a “reasonable basis in the record and in
    accepted financial principles relevant to determining the value of corporations and their
    stock.”2
    Here, the trial court gave no weight to Dell’s stock price because it found its market
    to be inefficient. But the evidence suggests that the market for Dell’s shares was actually
    efficient and, therefore, likely a possible proxy for fair value. Further, the trial court
    concluded that several features of management-led buyout (“MBO”) transactions render
    the deal prices resulting from such transactions unreliable. But the trial court’s own
    findings suggest that, even though this was an MBO transaction, these features were largely
    absent here. Moreover, even if it were not possible to determine the precise amount of that
    market data’s imperfection, as the Court of Chancery concluded, the trial court’s decision
    to rely “exclusively” on its own DCF analysis3 is based on several assumptions that are not
    grounded in relevant, accepted financial principles.
    1
    DFC Global Corp. v. Muirfield Value Partners, --- A.3d ----, 
    2017 WL 3261190
    , at *12 (Del.
    Aug. 1, 2017) (quoting In re Shell Oil Co., 
    607 A.2d 1213
    , 1219 (Del. 1992)); see also M.G.
    Bancorp., Inc. v. Le Beau, 
    737 A.2d 513
    , 526 (Del. 1999) (“The Court of Chancery abuses its
    discretion when either its factual findings do not have record support or its valuation is not the
    result of an orderly and logical deductive process.”).
    2
    DFC, 
    2017 WL 3261190
    , at *1.
    3
    In re Appraisal of Dell (Dell Trial Fair Value), 
    2016 WL 3186538
    , at *51 (Del. Ch. May 31,
    2016).
    2
    We REVERSE, in part, and AFFIRM, in part, and REMAND for these reasons and
    those that follow. In addition, for reasons discussed in Section IV, we REVERSE and
    REMAND the Court of Chancery’s decision concerning the allocation of fees and costs
    among the appraisal class.
    I.
    A. Dell
    In June 2012, when the idea of an MBO first arose, Dell was a mature company on
    the brink of crisis: its stock price had dropped from $18 per share to around $12 per share
    in just the first half of the year. The advent of new technologies such as tablet computers
    crippled the traditional PC-maker’s outlook.       The Company’s recent transformation
    struggled to generate investor optimism about its long-term prospects. And the global
    economy was still hungover from the financial crisis of 2008.
    Other than a brief hiatus from 2004 to his return in 2007, Michael Dell had led Dell
    as CEO, from the Company’s founding in his first-year dorm room at the University of
    Texas at Austin when he was just nineteen years old, to a Fortune 500 behemoth with
    3
    global revenues hitting $56.9 billion in the fiscal year ending February 1, 2013.4 Dell was
    indisputably one of the world’s largest IT companies.5
    i.   Michael Dell’s Return and the Company’s Challenges
    Upon his return to the Company in 2007, Mr. Dell6 perceived three key challenges
    facing Dell. First, low-margin PC-makers such as Lenovo were muscling into Dell’s
    market share as the performance gap between its higher-end computers and the cheaper
    alternatives narrowed. Second, starting with the launch of Apple’s iPhone in 2007, the
    impending onslaught of smartphones and tablet computers appeared likely to erode
    traditional PC sales. Third, cloud-based storage from the likes of Amazon.com threatened
    the Company’s traditional server storage business.
    In light of these threats, Mr. Dell believed that, to survive and thrive, the Company
    should focus on enterprise software and services, which could be accomplished through
    acquisitions in these spaces. From 2010 through 2012, the Company acquired eleven
    companies for approximately $14 billion. And Mr. Dell tried to sell the market on this
    transformation. He regularly shared with equity analysts his view that the Company’s
    4
    
    Id. at *1;
    Revised Expert Report of Glenn Hubbard (Sept. 29, 2015), at A3262 [hereinafter Dell’s
    Valuation Expert Report]. In general, citations to the record have been shortened to a short name
    of the document, “at,” and the appendix page number. Page numbers beginning with “A” refer to
    the Appendix to the Appellant’s Opening Brief; page numbers beginning with “B” refer to the
    Appendix to the Appellees/Cross-Appellants’ Answering Brief and Opening Brief on Cross-
    Appeal; page numbers beginning with “AR” refer to the Appendix to Appellant’s Reply Brief on
    Appeal and Cross-Appellee’s Answering Brief on Cross-Appeal.
    5
    Dell’s Valuation Expert Report, supra note 4, at A3262.
    6
    As the Court of Chancery did in its opinion, we use the honorific “Mr. Dell” to distinguish
    Michael Dell from Dell, the company.
    4
    enterprise solutions and services divisions would achieve annual sales growth in the
    double-digits and account for more than half of Dell’s profits by 2016.
    Yet despite Dell’s M&A spurt and Mr. Dell’s attempts to persuade Wall Street to
    buy into the Company’s future, the market still “didn’t get” Dell, as Mr. Dell lamented.7 It
    still viewed the Company as a PC business, and its stock hovered in the mid-teens.
    ii.   The Market for Dell’s Stock
    Dell’s stock traded on the NASDAQ under the ticker symbol DELL.                     The
    Company’s market capitalization of more than $20 billion ranked it in the top third of the
    S&P 500.8 Dell had a deep public float9 and was actively traded as more than 5% of Dell’s
    shares were traded each week.10 The stock had a bid-ask spread of approximately 0.08%.11
    It was also widely covered by equity analysts,12 and its share price quickly reflected the
    7
    Dell Trial Fair Value, 
    2016 WL 3186538
    , at *2.
    8
    Dell’s Valuation Expert Report, supra note 4, at A3285. See also Revised Expert Report of
    Bradford Cornell (Sept. 27, 2015), at A3527 (noting Dell’s pre-announcement market
    capitalization was $18.902 billion).
    9
    As of August 3, 2012, Dell approximated the aggregate market value of its common stock held
    by non-affiliates to be $17.1 billion. Dell Form 10-K for FY 2013 (Mar. 12, 2013), at A1967
    [hereinafter Form 10-K 2013]. The public float was 84.29% in 2012. See Dell’s Valuation Expert
    Report, supra note 4, at A3423. At the time of the transaction, Dell had 1,765,369,276 publicly
    traded shares outstanding. Dell Trial Fair Value, 
    2016 WL 3186538
    , at *51.
    10
    See, e.g., Dell’s Valuation Expert Report, supra note 4, at A3285-86, A3423 (noting that Dell’s
    average weekly trading volume was 5.52% of its shares in 2012); 5 Alan R. Bromberg, Lewis D.
    Lowenfels & Michael J. Sullivan, Bromberg & Lowenfels on Securities Fraud § 7:484 (2d ed. June
    2017 Update) (“Turnover measured by average weekly trading of 2% or more of the outstanding
    shares would justify a strong presumption that the market for the security is an efficient one.”).
    11
    Dell’s Valuation Expert Report, supra note 4, at A3286, A3423.
    12
    See, e.g., JPMorgan Presentation to the Denali Special Committee (Oct. 9, 2012), at A1572
    (noting that, as of October 9, 2012, thirty-three research analysts were covering Dell).
    5
    market’s view on breaking developments.13 Based on these metrics, the record suggests
    the market for Dell stock was semi-strong efficient, meaning that the market’s digestion
    and assessment of all publicly available information concerning Dell was quickly
    impounded into the Company’s stock price.14 For example, on January 14, 2013, Dell’s
    stock jumped 9.8% within a minute of Bloomberg breaking the news of the Company’s
    take-private talks, and the stock closed up 13% from the day prior—on a day the S&P 500
    as a whole fell 0.1%.15
    B.     The Sale Process
    The first inkling of a Dell MBO can be traced to June 2012, when private equity
    executive Staley Cates of Southeastern Asset Management suggested to Mr. Dell that he
    might consider taking the Company private.16 Mr. Dell was intrigued as he believed it
    would be easier to execute the Company’s transformation plan unencumbered by
    stockholder pressure.17 However, the Company’s financial advisor, Goldman Sachs,
    warned that an MBO would be too difficult to pull off.18 But after Silver Lake’s Egon
    Durban also proposed the idea of an MBO that August, Mr. Dell enlisted the advice of
    13
    Dell’s Valuation Expert Report, supra note 4, at A3304-06.
    14
    
    Id. at A3263,
    A3285-86.
    15
    
    Id. at A3305-06.
    16
    Dell Trial Fair Value, 
    2016 WL 3186538
    , at *2.
    17
    Transcript of Michael Dell Deposition (May 14, 2015), at B1459-60 [hereinafter M. Dell
    Deposition].
    18
    Transcript of Michael Dell Trial Testimony (Oct. 6, 2015), at A582 [hereinafter M. Dell
    Testimony]; M. Dell Deposition, supra note 17, at B1459.
    6
    friend and private equity executive George Roberts of Kohlberg Kravis Roberts & Co. L.P.
    (“KKR”).19 This time, he received positive feedback, including an indication that KKR
    might be interested in participating should the Company go that route.20 Mr. Dell then
    brought the idea to Dell’s Board by calling the Company’s lead independent director, Alex
    Mandl, on Friday, August 14, 2012.21
    The following Monday, the Board met and created an independent special
    committee composed of four independent directors (the “Committee”) to evaluate possible
    transactions to acquire the Company proposed by Mr. Dell and/or any other party, as well
    as to explore possible strategic alternatives. The Board empowered the Committee to hire
    its own legal and financial advisors, and the Committee selected Debevoise & Plimpton
    LLP as legal counsel and JP Morgan Chase & Co. as financial advisor. (The Committee
    eventually hired Evercore Partners as a second financial advisor in January 2013.) The
    Committee also had full and exclusive authority to recommend to the Board a course of
    action regarding any proposed transaction, and the Board vowed not to recommend that
    stockholders approve a transaction without receiving a prior favorable recommendation
    from the Committee.
    Dell’s earnings for the second quarter of Fiscal 2013, announced the following day,
    August 21, 2012, underscored the Company’s challenges: revenue was down 8% from the
    19
    Dell Trial Fair Value, 
    2016 WL 3186538
    , at *2.
    20
    
    Id. 21 Id.
    7
    prior year, and earnings per share dropped 13%. The Company’s revenue fell short of
    expectations, and its management further revised its EPS forecast down 20% for Fiscal
    2013. Dell management said that the Company was amid a “long-term strategy” expected
    to “take time” to reap benefits.22 But one analyst called the Company a “sinking ship” and
    emphasized that “Dell’s turnaround strategy is fundamentally flawed [and] the
    fundamentals are bad. Dell may have responded too late to save itself.”23 Many analysts
    also revised their price targets downward.
    i.   The Pre-Signing Canvass
    The following month, September, after entering into confidentiality agreements
    with the Committee, Silver Lake and KKR began evaluating Dell’s proprietary data,
    including management projections.
    Mr. Dell, who owned 13.9% of the Company’s outstanding shares as of August
    2012 and 15.4% as of September 2012, also entered into a confidentiality agreement. Mr.
    Dell’s confidentiality agreement required him to, among other things, “explore in good
    faith the possibility of working with any such potential counterparty or financing source if
    requested by the Committee,” a provision designed to prevent his prior involvement with
    KKR and Silver Lake from deterring other possible bidders.24
    22
    
    Id. at *4.
    23
    
    Id. 24 Id.
    at *5.
    8
    After consulting with JPMorgan, the Committee decided to limit its initial pre-
    signing market canvass to KKR and Silver Lake because they were, according to
    JPMorgan, “among the best qualified potential acquirers,” and “there was a low probability
    of strategic buyer interest in acquiring the Company.”25 Using management forecasts that
    the Committee still considered “overly optimistic,”26 on October 9, 2012, the day after the
    Company’s stock price closed at $9.66 per share, JPMorgan shared with the Committee
    that it believed a financial sponsor could pay approximately $14.13 per share and still
    obtain an internal rate of return (“IRR”) of a level that could attract private equity buyers
    such as KKR and Silver Lake, a five-year IRR of 20% per share.27 At several Committee
    meetings that fall, JPMorgan and the Company’s bankers from Goldman Sachs shared a
    range of valuations for various transaction scenarios, including Goldman’s projections for
    the Company’s future share prices if Dell remained a standalone public Company. 28
    On October 23, 2012, a day on which Dell’s stock price was to close at $9.35, both
    KKR and Silver Lake proposed transactions to the Committee. KKR indicated its interest
    in an all-cash transaction at between $12.00 and $13.00 per share, excluding Mr. Dell’s
    and Southeastern’s shares. Under KKR’s proposal, Mr. Dell was to invest an additional
    25
    
    Id. at *6.
    26
    
    Id. 27 Id.
    at *6-7.
    28
    See 
    id. at *6
    (“On October 9, 2012, the Committee received a presentation from JPMorgan that
    provided a preliminary assessment of the Company’s value as a standalone entity.”); 
    id. at *7
    (“Goldman observed that ‘[i]llustrative standalone valuation analyses result in [Company] value
    outcomes that are significantly higher than the current share price.’”). However, Goldman Sachs’s
    preliminary report relied on management’s “September Case” projections considered overly
    optimistic. See 
    id. 9 $500
    million in the Company. Silver Lake proposed an all-cash transaction at between
    $11.22 and $12.16 per share, excluding Mr. Dell’s shares.
    But, as JPMorgan observed when reviewing these proposals with the Committee,
    these expressions of interest undershot the $14.13 per share that it believed a financial
    sponsor could pay. The Committee asked Mr. Dell to email both firms to encourage them
    to raise their offers, and he obliged—sending the same email to each in which he offered
    for Company management to meet with representatives of each firm and solicited their
    advice on what the Company could do to help improve their proposals.29
    But the Company’s third-quarter earnings, released on November 15, 2012, brought
    more bad news for Dell: revenue dropped 11% from the prior year, and EPS was down
    28%. During this period when Dell was trying to sell its long-term vision without success,
    it kept failing the quarterly tests on which so many market analysts focus. By way of
    example, this was the sixth of the past seven quarters that revenue fell below consensus
    estimates. As research analysts lowered their price targets out of concern for the future of
    the PC industry and growing skepticism about Dell’s turnaround strategy, even CFO Brian
    Gladden acknowledged that “[m]anagement projections appear optimistic given valuation
    & sell-side estimates of Dell future value.”30 The Committee enlisted Boston Consulting
    Group (“BCG”) to formulate independent projections for the Company.
    29
    
    Id. at *8.
    30
    
    Id. 10 By
    December 3, 2012, KKR withdrew its proposal as it was unable to “get [its] arms
    around the risks of the PC business.”31
    For his part, Mr. Dell remained open “to join up with whoever” and was willing to
    supply as much equity as necessary for a transaction.32 To restore competition to the
    process once KKR dropped out, the Committee asked another PE heavyweight, Texas
    Pacific Group (“TPG”), who had recently invested in Dell’s down-market rival Lenovo, to
    explore an acquisition.33 Though TPG signed a confidentiality agreement, obtained access
    to the data room, “spent a good deal of resources on it,”34 and its leaders sat through
    presentations by Dell management, the PE firm reported to the Committee on December
    23, 2012, that it decided not to submit a bid as “cash flows attached to the PC business
    were simply too uncertain, too unpredictable to establish an investment case.” 35
    By January 24, 2013, three additional parties had expressed a desire to explore a
    deal. GE Capital, a “strategic party,” told Evercore that it was interested in buying the Dell
    Financial Services business for approximately the book value of its assets, between $3.5
    and $4 billion.36 Blackstone also called Evercore with a heads-up that it anticipated
    exploring a Dell deal during the go-shop and “seeking assurances that any definitive
    31
    
    Id. 32 Id.
    33
    
    Id. at *9.
    34
    Transcript of Alex Mandl Trial Testimony (Oct. 5, 2015), at A314 [hereinafter Mandl
    Testimony].
    35
    Dell Trial Fair Value, 
    2016 WL 3186538
    , at *9-10.
    36
    Minutes of Special Committee Meeting (Jan. 24, 2013), at A1639-40.
    11
    agreement the Company may be considering entering into would provide for a meaningful
    go-shop process.”37 Last, Southeastern sought to enter into a confidentiality agreement and
    start reviewing the Company’s confidential information.38
    News that Dell was exploring a strategic transaction had been leaking out since
    December, and Evercore reasoned that “if there were any people out there who were
    actively interested, there was a good chance they would have already come forward.”39
    For its part, Silver Lake remained interested in a deal through it all. Over the course
    of negotiations, the Committee persuaded Silver Lake to raise its offer six times from its
    initial proposal of $11.22-to-$12.16 per share.40 It helped that, after the Board resolved to
    seek $13.75 per share and settle for no less than $13.60 per share, Mr. Dell agreed to accept
    a lower price to roll over his shares than unaffiliated stockholders were to receive. On
    February 3, Silver Lake presented the Committee two options greater than its existing
    $13.50 per share offer: either (i) $13.60 per share if it allowed the Company to continue its
    regular quarterly dividend payment through closing, or (ii) $13.75 all-cash with no
    37
    
    Id. at A1640.
    The Court of Chancery opinion notes that Evercore’s engagement with the
    Committee promised it a contingency fee if and only if a deal surfaced during the go-shop and, as
    such, it suggested that Evercore advised the Committee to delay negotiations with Blackstone until
    the go-shop due to the incentives of its own compensation arrangement. See Dell Trial Fair Value,
    
    2016 WL 3186538
    , at *11. But other evidence in the record suggests that Blackstone proposed
    waiting until the go-shop on its own. See Transcript of William Hiltz Trial Testimony (Oct. 6,
    2015), at A517 [hereinafter Hiltz Testimony]; Minutes of Special Committee Meeting (Jan. 24,
    2013), at A1640.
    38
    
    Id. 39 Hiltz
    Testimony, supra 
    note 37, at A516.
    40
    Schedule 14A (May 31, 2013), at 27 (A2199), 30 (A2202), 37-38 (A2209-10), 41 (A2213)
    [hereinafter Proxy].
    12
    additional dividends. After the Committee told Silver Lake that $13.60 would not suffice
    under the first alternative, Silver Lake boosted the cash component to $13.65 per share on
    February 4, its “best and final offer.”41
    The Committee met with its financial advisors on the afternoon of February 4: both
    Evercore and JPMorgan indicated that they considered $13.65 per share fair to the
    unaffiliated stockholders from a financial point of view.42 The Committee recommended
    that the Board accept Silver Lake’s offer, and, aside from Mr. Dell, who was not present,
    the Board unanimously adopted resolutions approving the transaction.43 The next morning,
    February 5, 2013, the Company and three entities affiliated with Silver Lake and Mr. Dell
    (collectively the “Buyout Group”) entered into the merger agreement dated February 5,
    2013 (collectively with amendments, the “Merger Agreement”), and they publicly
    announced the planned transaction.44
    Mr. Dell signed a voting agreement wherein he pledged that he and his affiliates
    would vote their shares in proportion to the number of unaffiliated shares that vote for
    either (i) a “Superior Proposal” as defined in the Merger Agreement which, if available,
    would terminate the Merger Agreement; or (ii) the adoption of the Merger Agreement if
    the Board changed its recommendation.45               This meant that any outside bidder who
    41
    Dell Trial Fair Value, 
    2016 WL 3186538
    , at *12.
    42
    Id.; Proxy, supra note 40, at 41-42 (A2213-14), 60 (A2232).
    43
    
    Id. at 42
    (A2214).
    44
    
    Id. at 43
    (A2215); Merger Agreement at Proxy Annex A (A2364-2437).
    45
    Dell Trial Fair Value, 
    2016 WL 3186538
    , at *12.
    13
    persuaded stockholders that its bid was better would have access to Mr. Dell’s votes,
    eliminating one of the key problems other bidders may face when there is a CEO with
    material voting power.
    The transaction contemplated that Mr. Dell would roll over his shares at $13.36 per
    share and invest up to $500 million in additional equity and that an affiliate of his would
    invest up to $250 million in additional equity. This transaction structure would give Mr.
    Dell a 74.9% stake in the Company post-closing, and Silver Lake a 25.1% stake.
    The Merger Agreement also provided for a forty-five-day go-shop period ending
    March 23, 2013; a one-time match right for the Buyout Group available until the
    stockholder vote; and termination fees of $180 million if the Company agreed to a Superior
    Proposal as defined in the Merger Agreement that materialized during the go-shop period,
    or $450 million if the Company agreed to a non-Superior Proposal or to bids produced after
    the go-shop period.
    ii.   The Go-Shop Period
    Led by Evercore, the go-shop period began on February 5, 2013. Within ten days,
    Evercore had surveyed the interest of sixty parties, including Blackstone and Hewlett-
    Packard (“HP”), the two parties that Evercore had identified as Dell’s top prospects for a
    deal aside from the Buyout Group.
    As the Company’s closest competitor, HP appeared the natural strategic partner for
    a deal. Though Evercore told HP that a deal with Dell could realize between $3 and 4
    billion in annual cost savings through synergies and HP signed a confidentiality agreement,
    HP’s representatives never logged into the data room.
    14
    The Company received its first non-binding proposal of the go-shop period on
    March 5, 2013, when Carl Icahn of Icahn Enterprises L.P. (“Icahn”) wrote a letter to the
    Board opposing the MBO as announced and proposing a leveraged recapitalization instead.
    After signing a confidentiality agreement, Icahn accessed the data room on March 11.
    On March 21, 2013, GE Capital again offered to purchase the Company’s financial
    services business, this time for $3.6 billion in cash, and said that it was willing to allow the
    Committee to consider its proposal in conjunction with any other bid.
    The next day, Icahn submitted a revised non-binding proposal that was to allow
    stockholders to choose between either (i) rolling over their shares into a new entity one-to-
    one, or (ii) receiving $15.00 per share in cash up to $15.6 billion in total cash payments.
    Under this plan, if more stockholders requested cash than available under the $15.6 billion
    cap, the $15.6 billion would be distributed pro rata among all those stockholders requesting
    cash. Evercore valued this proposal at between $13.37 and $14.42 per share.
    That day, March 22, 2013, Blackstone and a group of other possible investors also
    submitted a non-binding proposal that involved a choice: existing Dell stockholders could
    receive $14.25 per share in cash or stock in a new entity valued at $14.25 capped at the
    total amount of equity issued by the new entity. Evercore and JPMorgan each said this
    proposal was worth $14.25 per share.
    By the time the go-shop period ended on March 23, Evercore had contacted sixty-
    seven parties, including twenty potential strategic buyers and seventeen financial sponsors,
    15
    about their interest in a transaction involving Dell.46 Evercore also received unsolicited
    inquiries from two strategic parties and two financial sponsors.47
    Mr. Dell was available to all parties throughout the go-shop period. Though Mr.
    Dell wanted to go on a two-week vacation that spring, Evercore insisted that he stay given
    that he “wasn’t unavailable to Silver Lake at any point during their final 2 pre-offer
    weeks.”48
    C.     After the Go-Shop
    Because the Icahn and Blackstone proposals could both potentially lead to Superior
    Proposals under the Merger Agreement, they qualified as Excluded Parties, which meant
    Dell would only have to pay a $180 million termination fee if it chose to forego the Silver
    Lake deal.
    Blackstone said that it would continue exploring a transaction only if Dell
    reimbursed it for its out-of-pocket due diligence expenses.          To avoid inadvertently
    breaching the Merger Agreement, which would allow the Buyout Group to revoke its offer,
    the Committee sought Silver Lake’s consent. Silver Lake agreed on the condition that it,
    too, receive payment for such expenses.          The Committee agreed to reimburse both
    Blackstone and Silver Lake for up to $25 million of due diligence costs.
    46
    Proxy, supra note 40, at 43 (A2215).
    47
    
    Id. 48 Dell
    Trial Fair Value, 
    2016 WL 3186538
    , at *14.
    16
    Icahn sought the same arrangement for his firm while it was negotiating over a
    waiver of the limitations on deals with interested stockholders under 
    8 Del. C
    . § 203.
    Concerned that Icahn might become hostile, the Committee agreed to extend the same
    expense reimbursement to Icahn as long as he signed a standstill.49
    Mr. Dell did not let his initial alliance with Silver Lake impede his willingness to
    explore a future with Blackstone. An email from Mr. Dell to Blackstone from that period
    shows that Mr. Dell felt that Blackstone “substantially” agreed with his vision for the
    Company and that Mr. Dell was “open to considering all alternatives.”50 But Blackstone’s
    actions also suggested that its interest was not founded—and that a deal would not hinge—
    on Mr. Dell’s continued involvement in the Company: Reuters reported that Blackstone
    was reviewing candidates to replace him as CEO.51
    Blackstone charged David Johnson, who had just joined the PE firm from his job as
    Dell’s head of acquisitions that January, with leading its diligence operation: more than
    460 people combed through the virtual data room, and approximately forty Blackstone
    employees took over a Texas ballroom for additional on-the-ground diligence alongside
    twenty Dell employees. From Dell’s side, Mr. Dell attested that he “spent more time with
    Blackstone than any of the other participants.”52 Overall, Dell’s whole management team
    49
    
    Id. at *15.
    Icahn agreed to these terms. See Proxy, supra note 40, at 49 (A2221).
    50
    Dell Trial Fair Value, 
    2016 WL 3186538
    , at *15.
    51
    See 
    id. 52 Id.
    17
    spent more time with Blackstone representatives than with those from any other
    prospective investor, including Silver Lake.
    But this diligence operation ultimately led Blackstone to back down. It withdrew
    from the bidding on April 18, 2013, and cited two key reasons for its decision: “(1) an
    unprecedented 14 percent market decline in PC volume in the first quarter of 2013, its
    steepest drop in history, and inconsistent with Management’s projections for modest
    industry growth; and (2) the rapidly eroding financial profile of Dell.”53 For instance,
    Blackstone noted that, since Blackstone’s initial bid on March 22, Dell revised its operating
    income projections downward by $700 million (from $3.7 billion to $3 billion).
    But Icahn remained interested and, on May 8, 2013, his firm teamed up with Cates’s
    Southeastern to propose a modified recapitalization plan that would allow existing
    stockholders to keep their shares and have the option to choose to receive either (i) $12.00
    in cash per share, or (ii) $12.00 worth of new shares of stock valued at $1.65 per share.
    Evercore did not think the Icahn-Southeastern plan could qualify as a Superior Proposal
    under the Merger Agreement given that it contemplated strictly a leveraged
    recapitalization.54
    Meanwhile, the Company’s first quarter results for Fiscal 2014, released May 16,
    2013, still failed to demonstrate that Dell’s turnaround strategy had legs as net income fell
    79% from the previous year, and GAAP earnings per share were down 81%. Bernstein
    53
    
    Id. 54 Id.
    at *16.
    18
    Research highlighted that Dell’s enterprise solutions and services segment had “woeful”
    margins, “well below industry peers.”55 The Company’s CFO Brian Gladden did not object
    to that assessment and wrote in an email to Dell’s senior leadership team that they needed
    to have “some very serious conversations . . . about the trajectory of the business and our
    growth/profitability plans. It’s not apparent that the shift to growth will bring profit and
    cash in the short or long term . . . . We cannot support the current opex [operating expense]
    structure with these results.”56
    i.   Dueling Proposals Ahead of Stockholder Vote
    The Board arranged for a stockholder vote on the merger to occur at a special
    meeting on July 18, 2013. The definitive proxy statement filed May 31, 2013, explained
    that the Committee decided to recommend the transaction with Silver Lake as fair to
    unaffiliated stockholders because it involved, among other things: (i) the certainty of cash
    consideration; (ii) a 37% premium over the Company’s ninety-day-average unaffected
    trading price of $9.97; and (iii) a 25% premium over its one-day unaffected trading price
    of $10.88.57 In evaluating the transaction’s fairness, the Committee “believ[ed] that the
    trading price of the Common Stock at any given time represent[ed] the best available
    indicator of the Company’s going concern value at that time, so long as the trading price
    55
    
    Id. 56 Id.;
    Email from B. Gladden to J. Clarke et. al. re: 1Q summary (May 17, 2013), at B724.
    57
    Proxy, supra note 40, at 55 (A2227).
    19
    at that time is not impacted by speculation regarding the likelihood of a potential
    transaction.”58
    But Icahn was still in the hunt: he filed his preliminary proxy statement on June 6;
    disclosed on June 18 that he and affiliates had purchased seventy-two million shares from
    Southeastern at $13.52 per share; and advised Dell stockholders in writing on June 19 that
    he planned to nominate his own slate of directors who would scrap the transaction with the
    Buyout Group and instead launch a self-tender for 1.1 billion shares at $14 per share. Icahn
    vowed not to tender his shares. On July 1, Icahn revealed to the Committee and the
    Company’s stockholders that lenders had committed $5.2 billion to finance the partial
    tender offer proposal.
    After the leading proxy advisory firms recommended that stockholders approve the
    MBO, Icahn revised his proposal on July 12 to add one warrant for every four shares
    tendered. Each warrant would entitle the holder for a period of seven years to purchase
    one share of the Company’s common stock for $20.
    On July 17, the day before the vote, the Committee’s proxy solicitor informed it that
    the Company’s stockholders were unlikely to approve the merger. To avoid defeat, the
    Committee convened the meeting and adjourned it without holding a vote, affording the
    Buyout Group time to improve its proposal.
    The Buyout Group initially proposed adding $0.10 per share to the merger
    consideration in exchange for reducing the number of stockholders needed to approve the
    58
    
    Id. at 60
    (A2232).
    20
    merger, from the majority of all unaffiliated stockholders to simply the majority of those
    unaffiliated stockholders present at the meeting or who vote by proxy. But the Committee
    rejected this adjustment on July 30, sending the Company’s stock price down 2.55%.
    The next day, the Buyout Group sweetened the deal for lowering the threshold for
    approving the deal: in addition to the ten-cent bump that brought the merger consideration
    to $13.75, the Buyout Group promised a special cash dividend of $0.08 per share; vowed
    to pay a third-quarter dividend of $0.08 no matter the closing date; and agreed to accept a
    reduced termination fee of $180 million instead of $450 million if the stockholders rejected
    the merger in favor of a leveraged recapitalization or similar proposal in the next twelve
    months. After the Committee insisted that it would not accept the deal unless the special
    cash dividend increased to $0.13, the Buyout Group agreed, bringing the total value of the
    deal to $13.96 per share. (To finance the adjustment, Mr. Dell agreed to receive $12.51
    instead of $13.36 for his rollover shares.)
    When the Committee met to evaluate the revised proposal on August 2, 2013, both
    Evercore and JPMorgan determined the $13.75 per share deal price to be fair to the
    unaffiliated stockholders. Following the Committee’s advice, the Board approved the
    revised transaction (hereinafter, the “Merger”) and amended the Merger Agreement to
    reflect the changed deal terms. A vote was scheduled for September 12, 2013.
    21
    ii.    Stockholder Vote
    At the special meeting held September 12, 2013, 57% of all Dell shares approved
    the Merger (70% of the shares present at the meeting). The Merger closed October 29,
    2013, and the shares of non-dissenting Dell stockholders were converted into $13.75 per
    share in cash. Though Icahn and Southeastern initially indicated that they would seek
    appraisal if the Merger were approved, they withdrew their demands. However, holders of
    38,765,130 shares of Dell common stock demanded appraisal.59
    D.         The Appraisal Trial
    The four-day appraisal trial in October 2015 featured 1,200 exhibits, seventeen
    depositions, live testimony from seven fact witnesses and five expert witnesses, a 542-
    paragraph-long pre-trial order, and 369 pages of pre- and post-trial briefing. Petitioners
    argued that, as demonstrated through their expert’s DCF analysis, the fair value of the
    Company’s common stock at the effective time of the Merger was actually $28.61 per
    share—more than double the deal price of $13.75. If this valuation were correct, the
    Buyout Group obtained Dell at a $26 billion discount to its actual value. In contrast, Dell
    maintained that its DCF analysis yielding a $12.68 per share valuation was a more
    appropriate approximation of fair value, but that, in light of the uncertainties facing the PC
    industry, fair value could be as high as the deal price (but not greater).
    59
    In re Appraisal of Dell (Dell Fees & Expenses), 
    2016 WL 6069017
    , at *1 (Del. Ch. Oct. 17,
    2016).
    22
    E.   The Court of Chancery’s Determination of Fair Value
    The Court of Chancery acknowledged that “[t]he consideration that the buyer agrees
    to provide in the deal and that the seller agrees to accept is one form of market price data,
    which Delaware courts have long considered in appraisal proceedings.”60 However, the
    court believed that flaws in Dell’s sale process meant that the deal price of $13.75 should
    not be afforded any weight here since it was “not the best evidence of [the Company’s] fair
    value.”61 Accordingly, the trial court disregarded both Dell’s pre-transactional stock price
    and the deal price entirely.
    The Court of Chancery identified three crucial problems with the pre-signing phase
    of the sale process that contributed to its decision to disregard the market-based indicators
    of value.
    First, the primary bidders were all financial sponsors who used an LBO pricing
    model to determine their bid prices—meaning that the per-share deal price needed to be
    low enough to facilitate an IRR of approximately 20%. As the court saw it, the prospective
    PE buyers, the Buyout Group, Mr. Dell, and the Committee never focused on determining
    the intrinsic value of the Company as a going concern.
    Second, the trial court believed that Dell’s investors were overwhelmingly focused
    on short-term profit, and that this “investor myopia” created a valuation gap that
    purportedly distorted the original merger consideration of $13.65. Thus, under the Court
    60
    Dell Trial Fair Value, 
    2016 WL 3186538
    , at *22.
    61
    
    Id. at *22,
    *29.
    23
    of Chancery’s logic, the efficient market hypothesis—which teaches that the price of a
    company’s stock reflects all publicly available information as a consensus, per-share
    valuation—failed when it came to Dell, diminishing the probative value of the stock price.
    This phenomenon also allegedly depressed the deal price by anchoring deal negotiations at
    an improperly low starting point.62
    Third, the trial court concluded that there was no meaningful price competition
    during the pre-signing phase as, at any given time during the pre-signing phase, there were
    at most two private equity sponsors competing for the deal, creating little incentive to bid
    up the deal price. The trial court especially faulted the Committee for declining to reach
    out to potential strategic bidders, such as HP, during the pre-signing phase, leaving the
    financial sponsors who were engaged without the incentive “to push their prices upward to
    pre-empt potential interest from that direction.”63 According to the trial court, large private
    equity buyers such as those engaged here are notoriously averse to topping each other, and
    without the specter of a strategic buyer, the Committee lacked “the most powerful tool that
    a seller can use to extract a portion of the bidder’s anticipated surplus”—the “threat of an
    alternative deal.”64
    Next, the trial court evaluated the post-signing go-shop process, where it identified
    several additional issues that it believed further contributed to a deal price that fell short of
    fair value. Though two additional proposals to acquire the Company emerged during the
    62
    
    Id. at *33-36.
    63
    
    Id. at *37.
    64
    
    Id. 24 go-shop
    period, from Blackstone and Icahn, the trial court dismissed their import given
    that these prospective buyers also operated within the “confines of the LBO model,” and
    that the deal price ultimately increased by just 2% over the original merger consideration
    of $13.65 per share as a result of this go-shop.
    Further, the trial court observed that the deal’s structure as an MBO imposed several
    additional, supposedly insurmountable impediments to Dell’s ability to prove at trial that
    the deal’s “structure in fact generated a price that persuasively established the Company’s
    fair value.”65 The trial court emphasized that, to prove a go-shop’s worth, it is crucial to
    show that prospective rival bidders had a “realistic pathway to success” so as to justify the
    time, expense, and harm to professional relationships that might result from pursuing an
    offer.66 Though the trial court recognized that the “relatively open” structure of the
    Committee’s go-shop “raised fewer structural barriers than the norm,”67 the court believed
    such openness could not obviate the issues imposed by features “endemic to MBO go-
    shops,” which “create a powerful disincentive for any competing bidder—and particularly
    competing financial bidders—to get involved.”68 These features include a so-called
    “winner’s curse” and the management team’s inherent value to the Company.69
    65
    
    Id. at *39.
    66
    
    Id. 67 Id.
    at *40.
    68
    
    Id. at *43.
    69
    
    Id. 25 The
    concept of a “winner’s curse” reflects the notion that “incumbent management
    has the best insight into the Company’s value, or at least is perceived to have an
    informational advantage,” so if a financial buyer is willing to outspend management to win
    a deal, it must be overpaying because it must have overlooked some piece of information
    that dissuaded management from bidding as much.70 Further, the trial court inferred that
    “Mr. Dell’s unique value and his affiliation with the Buyout Group were negative factors
    that inhibited the effectiveness of the go-shop process,” 71 despite evidence that suggested
    that neither Blackstone nor Icahn—nor anyone else, for that matter—believed that Mr.
    Dell’s continued involvement with the Company was essential. Moreover, Mr. Dell
    appeared willing to work with any viable party.72
    In light of these apparent flaws in the sale process, both pre- and post-signing, the
    trial court found that the Company failed to establish that “the sale process offers the most
    reliable evidence of the Company’s value as a going concern.”73 Moreover, the Court of
    Chancery decided that “[b]ecause it is impossible to quantify the exact degree of the sale
    process mispricing,” it was going to discount the final merger consideration of $13.75
    entirely—giving it no weight when determining fair value.74
    70
    
    Id. at *42-43.
    71
    
    Id. at *44.
    72
    See 
    id. 73 Id.
    74
    
    Id. at *51.
    26
    But, given that the trial court deemed it “illogical” to believe that another bidder
    would not have topped the Buyout Group’s offer if the Company were actually worth the
    $28.61 per share advocated by the petitioners,75 the Court of Chancery rejected petitioners’
    DCF and arrived at its “fair value” determination of $17.62 per share through its own DCF
    analysis, using a mix of the inputs proposed by the petitioners’ and the Company’s experts
    and adjustments of its own.
    F.     This Appeal
    The Company argues that the trial court committed legal error and abused its
    discretion in failing to assign any weight to the deal price. On both fronts, the Company
    claims that the trial court erred by disregarding Section 262(h)’s requirement that it “take
    into account all relevant factors” in determining fair value.
    The Company articulates three reasons why it believes the trial court committed
    legal error. First, the Company argues that there is no requirement under Delaware law
    that the deal price be the “most reliable” or “best” evidence of fair value in order for it to
    be given any weight. Second, the Company posits that there is no requirement under
    Delaware law that the Court of Chancery disregard the deal price entirely if it cannot
    unequivocally quantify the precise amount of sale process mispricing. Third, the Company
    contends that the trial court erred in fashioning what seems akin to a bright-line rule that
    the deal prices in MBO transactions are distorted and should be disregarded. Dell states
    75
    
    Id. at *37.
    27
    that imposing such a rule would be “inconsistent with the flexible nature of the appraisal
    inquiry.”76
    Moreover, the Company notes that the trial court’s conclusions underpinning its
    decision to disregard deal price do not follow from the facts as found. In particular, the
    Company maintains that the trial court lacked a basis for finding that: the market for Dell’s
    stock was inefficient due to the alleged short-term focus of the Company’s investor base,
    yielding a valuation gap between Dell’s market value and its intrinsic value; the pre-signing
    phase lacked “meaningful price competition” because those involved in the sale process
    were fixated on determining a deal price that would generate the requisite IRR under the
    LBO model, and there were no strategic bidders involved; banks were reluctant to help
    finance the deal through debt, limiting the available leverage and therefore capping the deal
    price; the emergence of “topping bids” underscored the unfairness of the original merger
    consideration; and features endemic to MBO go-shops additionally distorted the relevance
    of the deal price. Thus, the Company argues that the trial court’s entire reasoning for
    assigning no weight to the deal price was based either on flawed premises or on theoretical
    constructs that lack support in this factual record.
    The Company also argues that, even if the trial court had a sound factual basis for
    disregarding the deal price entirely, its DCF analysis is flawed in three crucial ways: (1) it
    does not properly account for the Company’s FIN 48 contingent liability reserve because
    it deducts only $650 million instead of the actual $3.01 billion in the Company’s financial
    76
    Appellant’s Opening Br. at 26.
    28
    statements; (2) it fails to deduct taxes that would be due on foreign earnings if repatriated
    even though the trial court counted these earnings in calculating free cash flow; and (3) it
    employs the wrong tax rate in calculating the terminal value, the 21% effective tax rate
    instead of the marginal tax rate of 35.8%.
    In response, the petitioners argue that the Court of Chancery did consider “all
    relevant factors”—including the deal price—in determining fair value as the Court of
    Chancery outlined a litany of reasons why the sale process distorted the deal price’s worth
    as a proxy for fair value. Petitioners contend that the Company is itself the party advocating
    for an “inflexible bright-line rule” given that the Company seems to suggest that the Court
    of Chancery was required to “assign some mathematical weight to the deal price” in
    determining fair value.77 The petitioners observe that this Court has previously rejected
    that formalism in light of the language of Section 262.
    The petitioners also cross-appeal and argue that the trial court’s DCF analysis is
    flawed in two respects: (1) it wrongly accepts the adjustments to management projections
    advocated by the Company; and (2) it improperly includes two deductions, namely a
    working capital deduction of $3 billion (despite Dell’s history of funding its operations
    through free cash flow) and $1.2 billion in restricted cash.
    II.   Analysis
    We agree with petitioners that the trial court did consider all relevant factors
    presented, including Dell’s stock price and deal price. But we reverse because the
    77
    Appellees/Cross-Appellants’ Ans. Br. and Opening Br. on Cross-Appeal at 3, 44.
    29
    reasoning behind the trial court’s decision to give no weight to any market-based measure
    of fair value runs counter to its own factual findings. After reviewing our appraisal statute
    and accompanying jurisprudence, we explore why the facts fail to support the Court of
    Chancery’s reasoning for disregarding, in particular, the deal price. To the extent the trial
    court can justify giving any weight to its DCF analysis on remand, we conclude that, for
    the most part, the trial court did not abuse its discretion as to the asserted errors.
    A.     The Relevant Legal Framework
    The General Assembly created the appraisal remedy in 1899 after amending the
    corporate code to allow a corporation to be sold upon the consent of a majority of
    stockholders instead of unanimous approval as was previously required.78 Given that a
    single shareholder could no longer hold up the sale of a company, the General Assembly
    devised appraisal in service of the notion that “the stockholder is entitled to be paid for that
    which has been taken from him.”79 Stockholders who viewed the sale price as inadequate
    could seek “an independent judicial determination of the fair value of their shares” instead
    78
    Hon. Sam Glasscock III, Ruminations on Appraisal, Del. Lawyer, Summer 2017, at 8; Charlotte
    K. Newell, The Legislative Origins of Today’s Appraisal Debate, Del. Lawyer, Summer 2017, at
    12-13.
    79
    Tri-Continental Corp. v. Battye, 
    74 A.2d 71
    , 72 (Del. 1950). In DFC, we stated that the purpose
    of appraisal is to “make sure that [stockholders] receive fair compensation for their shares in the
    sense that it reflects what they deserve to receive based on what would fairly be given to them in
    an arm’s-length transaction.” 
    2017 WL 3261190
    , at *18.
    30
    of accepting the per-share merger consideration.80 There is one issue in an appraisal trial:
    “the value of the dissenting stockholder’s stock.”81
    Appraisals are odd. Unlike other cases, where one side loses if the other side fails
    to persuade the court that the evidence tilts its way,82 appraisals require the court to
    determine a number representing the fair value of the shares after considering the trial
    presentations and submissions of parties who have starkly different objectives: petitioners
    contend fair value far exceeds the deal price, and the company argues that fair value is the
    deal price or lower. In reality, the burden “falls on the [trial] judge to determine fair value,
    using ‘all relevant factors.’”83
    80
    Alabama By-Prod. Corp. v. Cede & Co., 
    657 A.2d 254
    , 258 (Del. 1995); Cede & Co. v.
    Technicolor, Inc., 
    542 A.2d 1182
    , 1186 (Del. 1988) (“An appraisal proceeding is a limited
    legislative remedy intended to provide shareholders dissenting from a merger on grounds of
    inadequacy of the offering price with a judicial determination of the intrinsic worth (fair value) of
    their shareholdings.”).
    81
    
    Technicolor, 542 A.2d at 1186
    (quoting Kaye v. Pantone, Inc., 
    395 A.2d 369
    , 374-75 (Del. Ch.
    1978)).
    82
    M.G. 
    Bancorp., 737 A.2d at 520
    (“In a statutory appraisal proceeding, both sides have the burden
    of proving their respective valuation positions by a preponderance of the evidence.”).
    83
    In re Appraisal of Ancestry.com, 
    2015 WL 399726
    , at *1 (Del. Ch. Jan. 30, 2015) (quoting 
    8 Del. C
    . § 262(h)); Eric L. Talley, Finance in the Courtroom: Appraising Its Growing Pains, Del.
    Lawyer, Summer 2017, at 16-17 (“[U]nlike highly trained (and highly remunerated) investment
    bankers — whose job requires generating a ‘football field’ range of discounted cash flow (DCF)
    valuations — a judge presiding over an appraisal proceeding must conjure up a single number at
    the end of the process.”).
    31
    Though the appraisal remedy is “entirely a creature of statute,”84 like most statutes,
    its specifics have been refined through years of judicial interpretation. Indeed, “fair value”
    has become a “jurisprudential, rather than purely economic, construct.”85
    Importantly for our purposes here, Section 262 provides that the Court of Chancery
    “shall determine the fair value of the shares exclusive of any element of value arising from
    the accomplishment or expectation of the merger or consolidation” plus interest.86 Equally
    critical is its requirement that, “[i]n determining such fair value, the Court shall take into
    account all relevant factors.”87 These provisions explain “what” the Court is valuing, and
    “how” the court should go about this task.
    i.   “What” the Court is Valuing
    We have explained that the court’s ultimate goal in an appraisal proceeding is to
    determine the “fair or intrinsic value” of each share on the closing date of the merger.88 To
    reach this per-share valuation, the court should first envisage the entire pre-merger
    company as a “going concern,” as a standalone entity, and assess its value as such.89 “[T]he
    corporation must be viewed as an on-going enterprise, occupying a particular market
    84
    Alabama By-Prod. v. 
    Cede, 657 A.2d at 258
    (quoting Alabama By-Prod. Corp. v. Neal, 
    588 A.2d 255
    , 256 (Del. 1991)).
    85
    DFC, 
    2017 WL 3261190
    , at *16 (citing Cavalier Oil Corp. v. Harnett, 
    564 A.2d 1137
    , 1144
    (Del. 1989)).
    86
    
    8 Del. C
    . § 262(h).
    87
    
    Id. 88 Cavalier
    Oil, 564 A.2d at 1142-43
    .
    89
    
    Id. at 1144
    (“The dissenting shareholder’s proportionate interest is determined only after the
    company as an entity has been valued.”).
    32
    position in the light of future prospects.”90 The valuation should reflect the “‘operative
    reality’ of the company as of the time of the merger.”91
    Because the court strives “to value the corporation itself, as distinguished from a
    specific fraction of its shares as they may exist in the hands of a particular shareholder,”
    the court should not apply a minority discount when there is a controlling stockholder. 92
    Further, the court should exclude “any synergies or other value expected from the merger
    giving rise to the appraisal proceeding itself.”93
    Then, once this total standalone value is determined, the court awards each
    petitioning stockholder his pro rata portion of this total—“his proportionate interest in [the]
    going concern”94 plus interest.
    90
    Shell 
    Oil, 607 A.2d at 1218
    .
    91
    M.G. 
    Bancorp., 737 A.2d at 525
    .
    92
    Cavalier 
    Oil, 564 A.2d at 1144
    (internal quotation marks omitted).
    93
    Global GT LP v. Golden Telecom, Inc., 
    993 A.2d 497
    , 507 (Del. Ch. 2010), aff’d, 
    11 A.3d 214
    (Del. 2010); DFC, 
    2017 WL 3261190
    , at *16 (The Court should exclude “any value that the selling
    company’s shareholders would receive because a buyer intends to operate the subject company,
    not as a stand-alone going concern, but as a part of a larger enterprise, from which synergistic
    gains can be extracted.” (quoting Union Ill. 1995 Inv. LP v. Union Fin. Grp., Ltd, 
    847 A.2d 340
    ,
    356 (Del. Ch. 2004))). As noted in DFC, there are policy reasons for excising the synergistic
    value: “the specific buyer [should] not end up losing its upside for [the] purchase by having to pay
    out the expected gains from its own business plans for the company it bought to the petitioners.”
    
    2017 WL 3261190
    , at *16. Further, “the broader excision of synergy gains could have also been
    thought of as a balance to the Court’s decision to afford pro rata value to minority stockholders.”
    
    Id. 94 Cavalier
    Oil, 564 A.2d at 1144 
    (quoting 
    Tri-Continental, 74 A.2d at 72
    ).
    33
    ii.   “How” the Court Should Approach Valuation
    By instructing the court to “take into account all relevant factors” in determining
    fair value, the statute requires the Court of Chancery to give fair consideration to “proof of
    value by any techniques or methods which are generally considered acceptable in the
    financial community and otherwise admissible in court.”95 Given that “[e]very company
    is different; every merger is different,”96 the appraisal endeavor is “by design, a flexible
    process.”97
    This Court has relied on the statutory requirement that the Court of Chancery
    consider “all relevant factors” to reject requests for the adoption of a presumption that the
    deal price reflects fair value if certain preconditions are met, such as when the merger is
    the product of arm’s-length negotiation and a robust, non-conflicted market check, and
    where bidders had full information and few, if any, barriers to bid for the deal.98 In Golden
    Telecom, we explained that Section 262(h) is “unambiguous[]” in its command that the
    Court of Chancery undertake an “independent” assessment of fair value, and that the statute
    “vests the Chancellor and Vice Chancellors with significant discretion to consider ‘all
    95
    Weinberger v. UOP, 
    457 A.2d 701
    , 713 (Del. 1983).
    96
    In re Petsmart, 
    2017 WL 2303599
    , at *26 (Del. Ch. May 26, 2017).
    97
    Golden Telecom, Inc. v. Global GT LP, 
    11 A.3d 214
    , 218 (Del. 2010).
    98
    See DFC, 
    2017 WL 3261190
    , at *1 (“We decline to engage in that act of creation, which in our
    view has no basis in the statutory text, which gives the Court of Chancery in the first instance the
    discretion to ‘determine the fair value of the shares’ by taking into account ‘all relevant factors.’”
    (quoting 
    8 Del. C
    . § 262(h)).
    34
    relevant factors’ and determine the going concern value of the underlying company.”99 In
    DFC, we again rejected an invitation to create a presumption in favor of the deal price.100
    Even aside from the statutory command to consider all relevant factors, we doubted our
    ability to craft the precise preconditions for invoking such a presumption.101
    As such, “the trial of an appraisal case under the Delaware General Corporation
    Law presents unique challenges to the judicial factfinder.”102 And this task is complicated
    by “the clash of contrary, and often antagonistic, expert opinions of value,” prompting the
    trial court to wade through “widely divergent views reflecting partisan positions” in
    arriving at its determination of a single number for fair value.103
    In the end, after this analysis of the relevant factors, “[i]n some cases, it may be that
    a single valuation metric is the most reliable evidence of fair value and that giving weight
    to another factor will do nothing but distort that best estimate. In other cases, it may be
    necessary to consider two or more factors.”104 Or, in still others, the court might apportion
    
    99 11 A.3d at 217-18
    .
    100
    DFC, 
    2017 WL 3261190
    , at *15.
    101
    
    Id. (“[N]ot only
    do we see no license in the statute for creating a presumption that the resulting
    price in such a situation is the ‘exclusive,’ ‘best,’ or ‘primary’ evidence of fair value, we do not
    share DFC’s confidence in our ability to craft, on a general basis, the precise pre-conditions that
    would be necessary to invoke a presumption of that kind.”).
    102
    Petsmart, 
    2017 WL 2303599
    , at *1 (citing Ancestry.com, 
    2015 WL 399726
    , at *2).
    103
    Shell 
    Oil, 607 A.2d at 1222
    .
    104
    DFC, 
    2017 WL 3261190
    , at *31; see also M.G. 
    Bancorp., 737 A.2d at 525
    -26 (“[T]he Court
    of Chancery has the discretion to select one of the parties’ valuation models as its general
    framework or to fashion its own.”); 
    id. at 526
    (“[A]lthough not required to do so, it is entirely
    proper for the Court of Chancery to adopt any one expert’s model, methodology, and mathematical
    calculations, in toto, if that valuation is supported by credible evidence and withstands a critical
    judicial analysis on the record.”).
    35
    weight among a variety of methodologies. But, whatever route it chooses, the trial court
    must justify its methodology (or methodologies) according to the facts of the case and
    relevant, accepted financial principles.105
    Given the human element in the appraisal inquiry—where the factfinder is asked to
    choose between two competing, seemingly plausible valuation perspectives, forge its own,
    or apportion weight among a variety of methodologies—it is possible that a factfinder,
    even the same factfinder, could reach different valuation conclusions on the same set of
    facts if presented differently at trial.106 There may be no perfect methodology for arriving
    at fair value for a given set of facts, and the Court of Chancery’s conclusions will be upheld
    105
    The statute does not instruct the Court of Chancery to create an investment bank-like football
    field and use it to come to a formulaic determination of value. In many situations, certain valuation
    methods (e.g., comparables-based analysis) may be of no reliable utility. Our cases stress that the
    statute assigns the Court of Chancery the duty to consider the relevant methods of valuation argued
    by the parties and then determine which method (and inputs), or combination of methods, yields
    the most reliable determination of value. See also DFC, 
    2017 WL 3261190
    , at *3 (“[I]f the Court
    of Chancery chooses to use a weighting of different valuation methodologies to reach its fair value
    determination, the court must explain its weighting in a manner supported by the record before
    it.”); 
    id. at *31
    (“[T]he Court of Chancery must exercise its considerable discretion while also
    explaining, with reference to the economic facts before it and corporate finance principles, why it
    is according a certain weight to a certain indicator of value.”).
    106
    M.G. 
    Bancorp., 737 A.2d at 526
    (“The Court of Chancery’s role as an independent appraiser
    does not necessitate a judicial determination that is completely separate and apart from the
    valuations performed by the parties’ expert witnesses who testify at trial. It must, however,
    carefully consider whether the evidence supports the valuation conclusions advanced by the
    parties’ respective experts.”); see also Petsmart, 
    2017 WL 2303599
    , at *27 n.338 (“My analysis
    of the reliability of deal price as a product of the efficacy of the sales process necessarily has been
    shaped by the arguments of counsel and the evidence they chose to present at trial.”); Merion
    Capital L.P. v. Lender Processing Servs., 
    2016 WL 7324170
    , at *16 (Del. Ch. Dec. 16, 2016) (“An
    argument may carry the day in a particular case if counsel advance it skillfully and present
    persuasive evidence to support it. The same argument may not prevail in another case if the
    proponents fail to generate a similarly persuasive level of probative evidence or if the opponents
    respond effectively.”).
    36
    if they follow logically from those facts and are grounded in relevant, accepted financial
    principles.107 “To be sure, “fair value” does not equal “best value.”108
    B.      The Court of Chancery’s Reasons for Disregarding
    Deal Price Do Not Follow from the Record
    The Company recasts the Court of Chancery’s fair value opinion as creating several
    bright-line rules, including that the court must assign no weight to the deal price if: (i) it is
    not the “best” evidence of fair value; (ii) the court cannot “quantify the exact degree of the
    sale process mispricing”; or (iii) the transaction is an MBO. And the Company argues that
    each such rule is flawed. Setting aside whether the Court of Chancery’s opinion actually
    purports to assert these more generalized propositions, we agree with the Company’s core
    premise that, on this particular record, the trial court erred in not assigning any
    mathematical weight to the deal price. In fact, the record as distilled by the trial court
    suggests that the deal price deserved heavy, if not dispositive, weight.
    107
    DFC, 
    2017 WL 3261190
    , at *1 (“[T]his Court must give deference to the Court of Chancery if
    its determination of fair value has a reasonable basis in the record and in accepted financial
    principles relevant to determining the value of corporations and their stock.”); 
    id. at *20
    (“Although the Court of Chancery has broad discretion to make findings of fact, those findings of
    fact have to be grounded in the record and reliable principles of corporate finance and
    economics.”).
    108
    See 
    id. at *18.
    Rather, as framed in another context, a fair price “means a price that is one that
    a reasonable seller, under all of the circumstances, would regard as within a range of fair value;
    one that such a seller could reasonably accept.” 
    Id. (quoting Cinerama,
    Inc. v. Technicolor, Inc.,
    
    663 A.2d 1134
    , 1143 (Del. Ch. 1994), aff’d, 
    663 A.2d 1156
    (Del. 1995)). And “[t]he fact that a
    transaction price was forged in the crucible of objective market reality (as distinguished from the
    unavoidably subjective thought process of a valuation expert) is viewed as strong evidence that
    the price is fair.” Van de Walle v. Unimation, Inc., 
    1991 WL 29303
    , at *17 (Del. Ch. Mar. 7,
    1991). See also Applebaum v. Avaya, Inc., 
    812 A.2d 880
    , 889-90 (Del. 2002) (stating that “in
    many circumstances a property interest is best valued by the amount a buyer will pay for it” and
    “a well-informed, liquid trading market will provide a measure of fair value superior to any
    estimate the court could impose.”).
    37
    On the other hand, we also agree with the petitioners that there is no requirement
    that the court assign some mathematical weight to the deal price, and that the court fulfilled
    its statutory obligation to take into account the deal price. The trial court’s thorough
    examination of Dell’s stock market dynamics and sale process demonstrates its
    consideration of these factors. But we reverse because there is a dissonance between the
    key underpinnings of the decision to disregard the deal price and the facts as found, and
    this dissonance distorted the trial court’s analysis of fair value.
    The three central premises that the Court of Chancery relied upon to assign no
    weight to the deal price were flawed. First, the court believed that a “valuation gap” existed
    between Dell’s stock price and the Company’s intrinsic value, and this conclusion—
    contrary to the efficient market hypothesis—led it to hypothesize that the bidding over Dell
    as a company was anchored at an artificially low price that depressed the ultimate deal
    price below fair value. Second, the court suggested that the lack of strategic buyers in the
    sale process—and, accordingly, the involvement of only private equity bidders—also
    pushed the deal price below fair value. Third, the court concluded that several factors
    endemic to MBO go-shops further undercut the deal price’s credibility. We consider each
    of these premises in turn and find them untenable in view of the Court of Chancery’s own
    findings of fact as considered in light of established principles of corporate finance.
    Without these premises, the trial court’s support for disregarding the deal price collapses.
    38
    Accordingly, the trial court’s reliance on them as a basis for granting no weight to the
    market-based indicators of value constituted an abuse of discretion meriting reversal.109
    i.   The Trial Court Lacked a Valid Basis for Finding a
    “Valuation Gap” Between Dell’s Market and Fundamental
    Values
    The Court of Chancery presumed “investor myopia” and hangover from the
    Company’s “nearly $14 billion investment in its transformation, which had not yet begun
    to generate the anticipated results” produced a “valuation gap” between Dell’s fundamental
    and market prices. That presumption contributed to the trial court’s decision to assign no
    weight to Dell’s stock price or deal price.110 The trial court believed that short-sighted
    analysts and traders impounded an inadequate—and lowball—assessment of all publicly
    available information into Dell’s stock price, diminishing its worth as a valuation tool.111
    But the record shows just the opposite: analysts scrutinized Dell’s long-range outlook when
    evaluating the Company and setting price targets, and the market was capable of
    accounting for Dell’s recent mergers and acquisitions and their prospects in its valuation
    of the Company.112
    109
    See Rapid-Am. Corp. v. Harris, 
    603 A.2d 796
    , 802 (Del. 1992) (“A court abuses its discretion
    in an appraisal proceeding when its factual findings do not have record support and its valuation
    is not the result of an orderly and logical deductive process.”).
    110
    Dell Trial Fair Value, 
    2016 WL 3186538
    , at *32, *34.
    111
    
    Id. at *33.
    112
    See, e.g., Jefferies (May 11, 2012), at A3282 (“With half of Dell’s sales still exposed to the PC
    market, the continuing degradation remains a worry. Recent software acquisitions provide
    tailwinds but in terms of size are unlikely as a whole to be big enough to completely move the
    needle.”); Barclays (May 14, 2012), at A3426 (“We believe the biggest issues facing the stock
    include secular challenges in PCs, inconsistent margins & acquisition risk.”); Goldman Sachs
    (Sept. 27, 2012), at A3427 (“We believe that PC OEMs such as Hewlett-Packard and Dell, will
    39
    Further, the Court of Chancery’s analysis ignored the efficient market hypothesis
    long endorsed by this Court. It teaches that the price produced by an efficient market is
    generally a more reliable assessment of fair value than the view of a single analyst,
    especially an expert witness who caters her valuation to the litigation imperatives of a well-
    heeled client.113
    A market is more likely efficient, or semi-strong efficient, if it has many
    stockholders; no controlling stockholder; “highly active trading”; and if information about
    the company is widely available and easily disseminated to the market. 114                  In such
    circumstances, a company’s stock price “reflects the judgments of many stockholders
    about the company’s future prospects, based on public filings, industry information, and
    research conducted by equity analysts.”115 In these circumstances, a mass of investors
    remain under significant pressure, as weak unit growth, aggressive PC pricing, and relatively firm
    component prices (particularly HDDs) combine to pressure both revenues and margins.”); Cowen
    (Nov. 16, 2012), at A3427 (“Dell’s PC issues are unlikely to be solved by the Windows 8 launch
    as the market’s structure has fundamentally shifted away from the paradigm that dominated the
    last two decades.”); Goldman Sachs (Dec. 2, 2012), at A3832 (“Dell still likely has billions more
    in acquisitions ahead of it if it plans on fully executing on its mission to become an enterprise
    solutions company.”).
    113
    See DFC, 
    2017 WL 3261190
    , at *18 (also noting that “the relationship between market
    valuation and fundamental valuation has been strong historically”); 
    id. at *21
    (describing the price
    produced by an efficient market as “informative of fair value”); 
    id. at *21
    n.144 (“In an efficient
    market you can trust prices, for they impound all available information about the value of each
    security.” (quoting Richard A. Brealey et. al., Principles of Corporate Finance 214 (2008))). And,
    even if the market were not precisely efficient, petitioners’ own expert has conceded that “[a]
    market that is not perfectly efficient may still value securities more accurately than appraisers who
    are forced to work with limited information and whose judgments by nature reflect their own views
    and biases.” Bradford Cornell, Corporate Valuation 46 (1993).
    114
    DFC, 
    2017 WL 3261190
    , at *21.
    115
    
    Id. 40 quickly
    digests all publicly available information about a company, and in trading the
    company’s stock, recalibrates its price to reflect the market’s adjusted, consensus valuation
    of the company.116
    The record before us provides no rational, factual basis for such a “valuation gap.”
    Indeed, the trial court did not indicate that Dell lacked a vast and diffuse base of public
    stockholders, that information about the Company was sparse or restricted, that there was
    not an active trading market for Dell’s shares, or that Dell had a controlling stockholder—
    or that the market for its stock lacked any of the hallmarks of an efficient market. In fact,
    the record shows that Dell had a deep public float,117 was covered by over thirty equity
    analysts in 2012,118 boasted 145 market makers,119 was actively traded with over 5% of
    shares changing hands each week,120 and lacked a controlling stockholder.121 As noted in
    the expert reports, Dell’s stock price had a track record of reacting to developments
    116
    
    Id. at *18
    (“[C]orporate finance theory reflects a belief that if an asset—such as the value of a
    company as reflected in the trading value of its stock—can be subject to close examination and
    bidding by many humans with an incentive to estimate its future cash flows value, the resulting
    collective judgment as to value is likely to be highly informative and that, all estimators having
    equal access to information, the likelihood of outguessing the market over time and building a
    portfolio of stocks beating it is slight.”).
    117
    Dell’s Valuation Expert Report, supra note 4, at A3423 (public float averaging 84.29% in
    2012).
    118
    
    Id. at A3424.
    119
    
    Id. 120 Id.
    at A3423.
    121
    M. Dell 
    Testimony, supra
    note 18, at A610; Transcript of Guhan Subramanian Trial Testimony
    (Oct. 7, 2015), at A998.
    41
    concerning the Company. For example, the stock climbed 13% on the day the Bloomberg
    first reported on Dell’s talks of going private.122
    Further, the trial court expressly found no evidence that information failed to flow
    freely or that management purposefully tempered investors’ expectations for the Company
    so that it could eventually take over the Company at a fire-sale price, as in situations where
    long-term investments actually led to such valuation gaps. 123 In fact, Mr. Dell tried to
    persuade investors to envision an enterprise solutions and services business enjoying
    double-digit sales growth and which would more than compensate for any decline in end-
    user computing.124 And he pitched this plan for a “prolonged” period, approaching nearly
    three years.125
    122
    Dell’s Valuation Expert Report, supra note 4, at A3305-06.
    123
    Dell Trial Fair Value, 
    2016 WL 3186538
    , at *24; 
    id. at *34
    (“Only when the gap persisted
    despite their efforts, and after both Southeastern and Silver Lake suggested the possibility of an
    MBO to Mr. Dell, did he eventually decide to pursue the opportunity that the market price was
    presenting.”).
    124
    
    Id. at *2
    (“Mr. Dell conferred with his management team and hired consultants to devise
    strategies to help the market view the Company as ‘a sum of the parts.’ Mr. Dell regularly
    communicated his views to analysts.”).
    125
    See 
    id. at *34
    (“Mr. Dell identified the opportunity to take the Company private after the stock
    market failed to reflect the Company’s going concern value over a prolonged period [of almost
    three years, beginning] . . . as early as January 2011.”); 
    id. at *15
    (“Mr. Dell[] . . . was focused on
    a long-term strategy of stabilizing revenues and capturing market share at the expense of short-
    term margins, just as he repeatedly had told the Board, the Committee, and stock market
    analysts.”).
    42
    There is also no evidence in the record that investors were “myopic” or shortsighted.
    Rather, the record shows analysts understood Dell’s long-term plans.126 But they just
    weren’t buying Mr. Dell’s story:
     “Though Dell may have an advantage in the near term with its new next-gen
    12G servers, we believe over the longer run, incremental shares gain in the x86
    market will likely be limited. As such, we expect Dell’s server business to grow
    roughly in line with the market.” (Wells Fargo, June 27, 2012, at A3429)
     “Top-tier OEMs continued to lose market share to white-box vendors, shedding
    85 basis points of revenue share at 111 points of unit share [year-over-year]. As
    we have mentioned before, in the longer term we expect that this dynamic will
    continue, further pressuring x86 units and revenues for top-tier OEMs, while
    adding further forces of commoditization across the x86 server market.”
    (Goldman Sachs, Sept. 10, 2012, at A3429)
     “While the company remains optimistic that recent enhancements to its storage
    portfolio could rekindle growth when demand improves, Dell’s slowing
    momentum here remains a factor to watch.” (Goldman Sachs, Nov. 16, 2012, at
    A3430)
     “We see risks for Dell including cyclical global PC and enterprise IT markets,
    including slowing in mature geographies, combined with competitive pricing
    and margin pressures from both large systems peers and aggressive commodity
    suppliers. PC unit and margin risks also include underlying dynamics in volume
    component supply.” (Evercore, Nov. 16, 2012, at A3430)
     “While we acknowledge Dell’s enterprise strategy, we still have concerns
    around whether it can ramp fast enough to offset pressures in PC-related
    businesses, including PC support and related sales of peripherals.” (Barclays,
    Dec. 3, 2012, at A3430)
    
    Id. at *2
    (“Market observers expressed doubt about management’s projections.”); 
    id. (“The 126
    Company’s market price suggested that the marginal purchaser shared the analysts’ skepticism.”).
    43
    The Court of Chancery’s myopia theory also overlooks that, at an earlier stage in its
    history, Dell was a growth stock trading at large multiples to its then-current cash flow.127
    That is, for much of its history, analysts bought Mr. Dell’s long-term vision. But, by the
    early years of the second decade of the 21st century, they were no longer doing so.128
    Further, the prospective bidders who later reviewed Dell’s confidential information
    all dropped out due to their considerable discomfort with the future of the PC market. The
    record simply does not support the Court of Chancery’s favoring of management’s
    optimism over the public analysts’ and investors’ skepticism—especially in the face of
    management’s track record of missing its own projections.129 (Even Mr. Dell doubted his
    management team’s forecasting abilities and conceded at trial, “We’re not very good at
    forecasting.”)130 And the Court of Chancery does not justify why it chose to do so. In
    127
    In 1999, Dell’s “earnings multiple”—its enterprise value (the market value of the company’s
    equity plus the company’s debt minus its cash) divided by its Earnings Before Interest Taxes
    Depreciation and Amortization (or “EBITDA”)—was almost sixty. In contrast, by 2013, Dell’s
    EV/EBITDA ratio hovered between four and five. See Dell’s Valuation Expert Report, supra note
    4, at A3295-96, A3300.
    128
    See 
    id. at A3300
    (showing that Dell’s EV/EBITDA ratio remained around or above twenty
    between 1998 and 2005 and that the ratio has remained under ten since 2009).
    129
    See 
    id. at *2,
    *6, *8. Management’s history of missing its forecasts should have given the Court
    of Chancery pause. See, e.g., In re Nine Sys. Corp. S’holders Litig., 
    2014 WL 4383127
    , at *42
    (Del. Ch. Sept. 4, 2014) (“The Court cannot accept that the same people who missed projections
    three-months out in September 2001 by a factor of three (where there was no intervening change
    to the Company’s business) would have been able to produce reliable projections in January 2002
    for an entire year.”), aff’d sub nom. Fuchs v. Wren Holdings, LLC, 
    129 A.3d 882
    (Del. 2015);
    Edward P. Welch et al., Folk on the Delaware General Corporation Law § 262.10, at 9-232 (6th
    ed. 2017) [hereinafter Folk] (“[T]he court will not use management projections in its valuations
    if the record shows they are unreliable.”).
    130
    M. Dell 
    Testimony, supra
    note 18, at A605. Mr. Dell added:
    I think we weren’t the only ones that were bad at forecasting. I think Gartner Group
    and IDC, and many of the financial analysts and our competitors, you know, all had
    44
    short, the record does not adequately support the Court of Chancery’s conclusion that the
    market for Dell’s stock was inefficient and that a valuation gap in the Company’s market
    trading price existed in advance of the lengthy market check, an error that contributed to
    the trial court’s decision to disregard the deal price.131
    ii.   The Lack of Strategic Bidders Is Not a Credible Reason for
    Disregarding the Deal Price
    The trial court’s complete discounting of the deal price due to financial sponsors’
    focus on obtaining a desirable IRR and not “fair value” was also error. Although the trial
    court did not have the benefit of our opinion in DFC, we rejected this view there and do so
    again here given we see “no rational connection” between a buyer’s status as a financial
    sponsor and the question of whether the deal price is a fair price.132 After all, “all
    disciplined buyers, both strategic and financial, have internal rates of return that they expect
    a pretty difficult time forecasting what was an uncertain and volatile business, with
    many, you know, changing factors, new products being introduced, all sorts of
    competitive forces that were hard to predict. And we were not very good at doing
    it.
    
    Id. at A605-06.
    131
    This is evident as the court observed that the stock price anchors negotiations and, if the stock
    price is low, the deal price necessarily might be low. See Dell Trial Fair Value, 
    2016 WL 3186538
    ,
    at *33 (“When a company with a depressed market price starts a sale process, the anchoring effect
    makes the process intuitively more likely to generate an undervalued bid.”).
    132
    DFC, 
    2017 WL 3261190
    , at *22; 
    id. at *2
    (“To be candid, we do not understand the logic of
    [diminishing the weight of a sale process that involved only financial sponsors and not strategic
    buyers]. Any rational purchaser of a business should have a targeted rate of return that justifies
    the substantial risks and costs of buying a business. That is true for both strategic and financial
    buyers. It is, of course, natural for all buyers to consider how likely a company’s cash flows are
    to deliver sufficient value to pay back the company’s creditors and provide a return on equity that
    justifies the high costs and risks of an acquisition.”).
    45
    in exchange for taking on the large risk of a merger, or for that matter, any sizeable
    investment of its capital.”133
    We found in DFC that the notion of a “private equity carve out” stood on especially
    shaky footing where other objective indicia suggested the deal price was a fair price. 134
    Such objective factors in DFC included that “every logical buyer” was canvassed, and all
    but the buyer refused to pursue the company when given the opportunity; concerns about
    the company’s long-term viability (and its long-term debt’s placement on negative credit
    watch) prevented lenders from extending debt; and the company repeatedly
    underperformed its projections.135
    Here, it is clear that Dell’s sale process bore many of the same objective indicia of
    reliability that we found persuasive enough to diminish the resonance of any private equity
    carve out or similar such theory in DFC.              For example, JPMorgan and Evercore
    choreographed the sale process to involve competition with Silver Lake at every stage, both
    pre-signing and during the go-shop. When KKR walked, TPG, another major-league PE
    buyer, was introduced. And both KKR and TPG demurred for many of the objective
    reasons that the stock market—and, later, Blackstone—doubted Dell’s ability to transform
    itself and become more profitable.
    133
    
    Id. at *2
    2; see also 
    id. at *2
    (“The ‘private equity carve out’ that the Court of Chancery seemed
    to recognize, in which the deal price resulting in a transaction won by a private equity buyer is not
    a reliable indication of fair value, is not one grounded in economic literature or this record.”).
    134
    
    Id. at *2
    2.
    135
    
    Id. at *2
    2-23.
    46
    Moreover, JPMorgan did not initially solicit the interest of strategic bidders because
    its analysis suggested none was likely to make an offer.136 Further, given leaks that Dell
    was exploring strategic alternatives, record testimony suggests that Evercore presumed that
    any interested parties would have approached the Company before the go-shop if serious
    about pursuing a deal.137
    The Committee, composed of independent, experienced directors and armed with
    the power to say “no,” persuaded Silver Lake to raise its bid six times. Nothing in the
    record suggests that increased competition would have produced a better result. JPMorgan
    also reasoned that any other financial sponsor would have bid in the same ballpark as Silver
    Lake.138
    The bankers canvassed the interest of sixty-seven parties, including twenty possible
    strategic acquirers during the go-shop. The go-shop’s forty-five-day window afforded
    potential bidders enough time to decide whether to continue to explore a transaction by
    submitting a non-binding indication of interest that qualified as a “Superior Proposal,”
    which accordingly would lower the termination fee from $450 million to $180 million
    thanks to “Excluded Party” status and give that party months to scrutinize the Company’s
    finances and growth prospects. The trial court acknowledged, “the steps to become an
    136
    Transcript of Ronald Nicol Trial Testimony (Oct. 6, 2015), at A705; Transcript of Drago
    Rajkovic Trial Testimony (Oct. 7, 2015), at A907.
    137
    Hiltz 
    Testimony, supra
    note 37, at A516.
    138
    Dell Trial Fair Value, 
    2016 WL 3186538
    , at *9.
    47
    ‘Excluded Party’ were also relatively few.”139 And the court even endorsed the go-shop’s
    overall design as “rais[ing] fewer structural barriers than the norm” and both “relatively
    open” and “relatively flexible.”140 Further, Evercore’s compensation was “tied directly to
    the success of the go-shop,” incentivizing it to make the go-shop as effective as possible.141
    The likeliest strategic bidder, HP, signed a confidentiality agreement during the go-
    shop, but it did not even log into the data room. Three parties signed non-binding initial
    expressions of interest: Blackstone, Icahn, and GE Capital.142 Yet, despite the quality of
    the go-shop’s design, the Court of Chancery believed that, given Dell’s complexity as a
    company, “the magnitude of the task” of conducting diligence on it might have had “a
    chilling effect on other parties,” without citing any evidence that any other party would
    have been interested.143 Regardless, interested parties did not need to complete diligence
    within the go-shop’s forty-five-day window.
    The Court of Chancery stressed its view that the lack of competition from a strategic
    buyer lowered the relevance of the deal price. But its assessment that more bidders—both
    strategic and financial—should have been involved assumes there was some party
    interested in proceeding. Nothing in the record indicates that was the case. Fair value
    139
    
    Id. at *40.
    140
    
    Id. at *40-41.
    141
    Hiltz 
    Testimony, supra
    note 37, at A514; Rebuttal Report of Professor Guhan Subramanian
    (July 24, 2015), at B1902, B1903-05 [hereinafter Petitioners’ Deal Process Expert Report].
    142
    Dell Trial Fair Value, 
    2016 WL 3186538
    , at *42.
    143
    
    Id. 48 entails
    at minimum a price some buyer is willing to pay—not a price at which no class of
    buyers in the market would pay.144 The Court of Chancery ignored an important reality:
    if a company is one that no strategic buyer is interested in buying, it does not suggest a
    higher value, but a lower one. “[O]ne should have little confidence she can be the special
    one able to outwit the larger universe of equally avid capitalists with an incentive to reap
    rewards by buying the asset if it is too cheaply priced.”145
    The magnitude of a potential Dell deal narrowed the class of prospective buyers
    even further—to the largest PE firms such as KKR, TPG, and Blackstone—though the trial
    court did not cite persuasive evidence in the record that this diminished the relevance of
    the deal price. In fact, Blackstone proved a formidable check on the fair value of the Silver
    Lake deal given Blackstone’s expenditure of resources on the project and ostensible
    willingness to do a deal if worthwhile. After submitting an initial proposal and gaining
    Excluded Party status during the go-shop, Blackstone spent nearly a month evaluating the
    Company, involving over 460 of its employees in diligence via the virtual data room and
    in a ballroom in Texas for in-person diligence with Dell employees. Dell agreed to
    reimburse it for these costs, as it did for Icahn, but Blackstone nonetheless still incurred
    the opportunity cost of channeling time and resources away from other deals, underscoring
    Blackstone’s commitment.
    144
    See DFC, 
    2017 WL 3261190
    , at *22 n.154 (“[T]he absence of synergistic buyers for a company
    is itself relevant to its value.”).
    145
    
    Id. at *15.
    49
    And this was not a buyout led by a controlling stockholder. Michael Dell only had
    approximately 15% of the equity.146 He pledged his voting power would go to any higher
    bidder, voting in proportion to other shares.
    Other than the Buyout Group, as mentioned, all prospective buyers who reviewed
    the Company’s confidential information retreated for the same reasons that the public
    markets were purportedly undervaluing Dell—trepidation about the future of the PC
    industry and the prospects of Dell’s long-term turnaround strategy. This consistency
    confirms that management did not intentionally depress the Company’s stock price in order
    to take advantage of a “trough” that public investors failed to recognize.147 In fact, the trial
    court expressly found that, “unlike other situations that this court has confronted, there is
    no evidence that Mr. Dell or his management team sought to create the valuation disconnect
    so that they could take advantage of it,” and “[t]o the contrary, they tried to convince the
    market that the Company was worth more.”148 Prospective buyers just did not believe the
    potential for a turnaround outweighed the risk of further erosion of PC sales and,
    accordingly, the Company’s balance sheet. This coherence in views also makes it hard to
    146
    M. Dell 
    Testimony, supra
    note 18, at A610.
    147
    Cf. Glassman v. Unocal Expl. Corp., 
    777 A.2d 242
    , 248 (Del. 2001) (“[I]f the merger was timed
    to take advantage of a depressed market, or a low point in the company’s cyclical earnings, or to
    precede an anticipated positive development, the appraised value may be adjusted to account for
    those factors.”).
    148
    Dell Trial Fair Value, 
    2016 WL 3186538
    , at *34.
    50
    take seriously the notion that Dell investors were incapable of accounting for Dell’s long-
    term strategy. And it reinforces the integrity of both Dell’s stock price and deal price.149
    Overall, the weight of evidence shows that Dell’s deal price has heavy, if not
    overriding, probative value. The transaction process exemplifies many of the qualities that
    Delaware courts have found favor affording substantial, if not exclusive, weight to deal
    price in the fair value analysis. Even the Court of Chancery’s own summary remarks
    suggest the deal price deserves weight as the court characterized the sale process as one
    that “easily would sail through if reviewed under enhanced scrutiny” and observed that
    “[t]he Committee and its advisors did many praiseworthy things,” too numerous to catalog
    in its opinion, as the trial court noted.150 Given the objective indicia of the deal price’s
    reliability and our rejection of the notion of a private equity carve out, to the extent that the
    Court of Chancery chose to disregard Dell’s deal price based on the presence of only
    private equity bidders, its reasoning is not grounded in accepted financial principles, and
    this assessment weighs in favor of finding an overall abuse of discretion. As explained
    below, there are other reasons that lead us to this conclusion.
    149
    See DFC, 
    2017 WL 3261190
    , at *20 (rejecting the argument that the market was incapable of
    accounting for regulatory risk and positing instead that such risk was, in fact, baked into the equity
    market price); 
    id. at *21
    (“That these other potential buyers dropped out of the sales process after
    receiving confidential information about DFC suggests that these parties were aware of the
    ‘trough’ DFC was in at the time and the uncertain future regulatory risk it faced, and ultimately
    did not think a transaction with DFC was worth pursuing. Indeed, [one of the two possible buyers
    who submitted a non-binding indication of interest] cited the regulatory risk facing the company
    as its reason for not wanting to pursue a transaction with DFC.”).
    150
    Dell Trial Fair Value, 
    2016 WL 3186538
    , at *29.
    51
    iii.      Features of MBOs Which Could Theoretically Undermine
    the Probative Value of the Deal Price Are Not Present Here.
    The Court of Chancery focused on three problems supposedly present in all MBOs
    to show that the deal price here is not evidence of fair value: (a) structural issues; (b) the
    “winner’s curse”; and (c) management’s perceptive value to the company. Yet none of
    these theoretical characteristics detracts from the reliability of the deal price on the facts
    presented here. As a result, the trial court’s reliance on these themes to disregard the deal
    price in its fair value analysis was error.
    a.      The record does not show that structural issues
    inhibited the effectiveness of the go-shop
    Though it is true that “[t]he structure of the go-shop is an obvious factor that affects
    a participant’s pathway to success,” even the petitioners’ expert characterized the structure
    here as “rais[ing] fewer structural barriers than the norm”151 and found no disqualifying
    fault with the design of Dell’s go-shop. The trial court determined “[t]he main structural
    problem that [petitioners’ expert] identified did not result from the terms of the go-shop in
    the abstract, but rather stemmed from the size and complexity of the Company.”152 But the
    “size and complexity” of Dell is not a characteristic unique to MBO go-shops, but a feature
    inherent to Dell. And, if size and complexity of a company were enough to render the
    ultimate deal price undeserving of any weight in the fair value analysis, it would deprive
    the deal price of any deference whenever any large and complex company is appraised.
    151
    
    Id. at *40.
    152
    
    Id. at *42.
    52
    In any event, Blackstone was well-equipped to overcome the size and complexity
    of Dell to fashion a rival competitive bid during the go-shop, and it expended the resources
    to do so—helping to push the original merger consideration higher. In fact, three parties
    gained Excluded Party status, demonstrating that claims of a “chilling effect” lack force.153
    Further, the Court of Chancery dismissed Dell’s deal price because, when
    confronting a proposed MBO, possible bidders during go-shops purportedly rarely submit
    topping bids because they have no “realistic pathway to success.”154 Although that may be
    true in some MBOs, here, rival bidders such as Blackstone, TPG, HP, and Icahn did have
    a realistic pathway to succeeding if they desired. And two non-binding proposals for the
    whole company and one for part of it surfaced. Of the transactions that featured go-shops
    announced between January 2006 and June 2015, fourteen deals had go-shops that
    produced superior bids (excluding the Dell deal).155 Two were MBOs:156 one resulted in a
    45% premium over the announced offer price,157 and the other yielded a per-share price
    that was 22% higher than the originally announced price.158 Petitioners’ deal process
    expert attempted to distinguish those deals by explaining management was not crucial to
    153
    Cf. 
    id. (“[T]hat does
    not mean that the magnitude of the task did not have a chilling effect on
    other parties.”).
    154
    
    Id. at *39.
    155
    Petitioners’ Deal Process Expert Report, supra note 141, at B1884.
    156
    
    Id. 157 Id.
    at B1885.
    158
    
    Id. at B1886.
    53
    either.159 But, as noted below, there is no evidence that management was critical here given
    both Blackstone’s and Icahn’s doubts about Mr. Dell’s leadership and apparent willingness
    to pursue transactions without his continued involvement.
    b.     The threat of a “winner’s curse” does not provide a
    valid reason for disregarding the deal price based on
    this record.
    The “winner’s curse” describes a theory that, in outbidding incumbent management
    to “win” a deal, a buyer likely overpays for the company because management would
    presumably have paid more if the company were really worth it. Recognizing this
    phenomenon, prospective bidders supposedly resist outbidding incumbent management for
    fear they might later discover the information that prevented management from bidding
    even higher in the first place. But the likelihood of a winner’s curse can be mitigated
    through a due diligence process where buyers have access to all necessary information.
    And, here, Dell allowed Blackstone to undertake “extensive due diligence,” diminishing
    the “information asymmetry” that might otherwise facilitate a winner’s curse.
    Mr. Dell “ultimately spent more time with Blackstone than any of the other
    participants, including Silver Lake,” and the Court of Chancery found that “[t]he record
    provided no reason to harbor any concern about Mr. Dell’s level of cooperation or
    responsiveness,” and “all of the bidders received access to the data they requested.”160 The
    See Dell Trial Fair Value, 
    2016 WL 3186538
    , at *36 n.35; Petitioners’ Deal Process Expert
    159
    Report, supra note 141, at B1885-86.
    160
    Dell Trial Fair Value, 
    2016 WL 3186538
    , at *42.
    54
    trial court even concluded that “the Committee appears to have addressed the problem of
    information asymmetry and the risk of the winner’s curse as best they could.” 161 Yet in
    spite of Dell’s efforts, the court concluded, the threat of a winner’s curse is nonetheless
    “endemic to MBO go-shops” and imposes a “powerful disincentive for any competing
    bidder,” even though Blackstone and Icahn surfaced with non-binding proposals.162 But,
    aside from the theoretical, the Court of Chancery did not point to any bidder who actually
    shied away from exploring an acquisition out of fear of the winner’s curse phenomenon.
    The Court of Chancery’s analysis of the winner’s curse phenomenon also suggests
    that “[s]trategic buyers are less subject to the winner’s curse because they typically possess
    industry-specific expertise and have asset-specific valuations that incorporate
    synergies.”163 Therefore, the “winner’s curse” theory cannot explain the lack of strategic
    buyers—one of the primary faults the court found with the sale process.
    The Court of Chancery also posited that Mr. Dell’s vast knowledge about the
    Company required that any rival bidder “have a strategy for dealing with Mr. Dell’s
    superior knowledge.”164 Blackstone had such a strategy: its diligence team included David
    Johnson, who had recently left Dell as head of acquisitions and strategy.165 Further, as
    discussed below, the record also suggests that Icahn doubted the value of Mr. Dell’s insight.
    161
    
    Id. at *43.
    162
    Id.
    163
    
    Id. at *42.
    164
    
    Id. 165 See
    id. at *13 
    (“Blackstone had a sophisticated technology group and one of its partners, David
    Johnson, had recently worked as the Company’s head of acquisitions.”); Mandl 
    Testimony, supra
    55
    Thus, while the notion of a “winner’s curse” might deter rival bids in some MBOs,
    the record in this case does not provide a basis for suspecting that it did so here—especially
    given the theory is rebutted directly in the record by two proposals from financial sponsors
    during the go-shop.166 The more likely explanation for the lack of a higher bid is that the
    deal market was already robust and that a topping bid involved a serious risk of
    overpayment. If a deal price is at a level where the next upward move by a topping bidder
    has a material risk of being a self-destructive curse, that suggests the price is already at a
    level that is fair. The issue in an appraisal is not whether a negotiator has extracted the
    highest possible bid. Rather, the key inquiry is whether the dissenters got fair value and
    were not exploited.
    c.     Management’s Inherent Value to the Company
    The Court of Chancery also presumed that “Mr. Dell’s value to the Company”
    imposed another impediment to the likelihood of rival bidders succeeding and thus
    dissuaded them from even trying.167 But, again, the Court of Chancery’s own fact findings
    contradict and do not rationally support this conclusion.
    note 34, at A333-34; Hiltz 
    Testimony, supra
    note 37, at A521; Petitioners’ Deal Process Expert
    Report, supra note 141, at B1893-94.
    166
    The record also suggests that Mr. Dell believed private equity firms were just as capable of
    assessing Dell’s prospects. After both KKR and TPG passed on continuing to pursue the Company
    during the pre-signing phase, Mr. Dell recalled, “I was disappointed. I was starting to think that
    maybe we were missing something.” M. Dell 
    Testimony, supra
    note 18, at A596 (emphasis added).
    167
    Dell Trial Fair Value, 
    2016 WL 3186538
    , at *43.
    56
    First, the trial court supports its assessment that “the Company’s relationship with
    Mr. Dell was an asset in itself” through event studies showing that Dell’s stock dropped
    when he left in 2004 and jumped upon his return in 2007.168 But it does not explain why
    it could trust the market’s ability to assess the value of Mr. Dell’s leadership but not its
    ability to serve as a reliable indicator of the value of Dell’s stock. Further, assuming
    arguendo that market data from 2007 demonstrated Mr. Dell’s value to the Company in
    2007, it does not follow that such evidence showed his value six years later, in 2013, at the
    time of the Merger—after Dell’s stock had languished for several years and investors
    questioned Mr. Dell’s strategy for transforming the Company (another finding of the trial
    court). Stale event studies and a single, self-serving e-mail from Mr. Dell suggesting that
    a potential customer might not engage the Company if he were replaced do not amount to
    sufficient evidence of Mr. Dell’s actual value.169 The Court of Chancery’s view of this
    issue is also in tension with its myopia theory. If Mr. Dell was as valued by market players
    and as trusted by the stock market as this aspect of the Court of Chancery’s decision
    implies, then the decision’s failure to give any weight to the stock market’s reaction to Mr.
    Dell’s lengthy efforts to convince it of the bright future that the transformation plan
    augured for Dell stockholders is difficult to understand.
    168
    
    Id. at *44
    (citing event studies showing the Company lost $1.2 billion in market value upon
    Mr. Dell’s departure from the Company in March 2004 and gained $2.5 billion in market value
    upon his return in January 2007).
    169
    
    Id. at *43
    n.42.
    57
    The Court of Chancery also acknowledged “evidence that Blackstone and Icahn did
    not regard Mr. Dell as essential to their bids.”170 Blackstone had investigated possible
    replacements as CEO.171 And Icahn advised stockholders that he believed “the company
    would be worth far, far more” without Mr. Dell at the helm.172
    And, even if one could accept the trial court’s view that Mr. Dell’s service as CEO
    added per-share value to the Company’s stock, the record does not suggest that he would
    have stopped serving the Company if Blackstone, TPG, or another reputable buyer had
    prevailed. He was contractually obligated to explore “any such potential counterparty or
    financing source if requested by the Committee,” though he had “discretion” as to whether
    to continue after such exploration.173 Significantly, based on Mr. Dell’s good faith during
    the go-shop and “credibl[e]” testimony at trial, the Court of Chancery concluded that “the
    record indicated that Mr. Dell actually was willing to work with other buyout groups.”174
    Thus, it is difficult to discern how “Mr. Dell’s unique value and his affiliation with
    the Buyout Group were negative factors that inhibited the effectiveness of the go-shop
    process.”175 The Court of Chancery even acknowledged that “[e]xceptional bidders like
    170
    
    Id. at *44.
    171
    
    Id. at *43
    n.42.
    172
    
    Id. at *44.
    Icahn also advised stockholders that he considered Mr. Dell “a major liability” to
    the Company. 
    Id. at *44
    n.44.
    173
    
    Id. at *5,
    *44. Given Mr. Dell’s testimony and actions, the Court of Chancery suggested, “[i]n
    a different case in which a key employee was less forthcoming, a comparable commitment might
    not be as persuasive.” 
    Id. at *44.
    174
    
    Id. 175 Id.
    58
    Blackstone and Icahn could overcome” such barriers,176 and the court did not identify any
    possible bidders that were actually deterred because of Mr. Dell’s status.
    C.     Market Data Conclusion
    The actual facts concerning Dell’s market values—the particularities of its stock
    market and the sale process—demonstrate that the Court of Chancery’s reasons for
    assigning no weight to the market values are flawed. The apparent efficiency of Dell’s
    pre-signing stock market and the long-term approach of its analysts undermine concerns of
    a “valuation gap.” Competition limited to private equity bidders does not foreclose the sale
    price reflecting fair value, especially where the special committee instituted and oversaw a
    robust post-signing go-shop process. And, though the Court of Chancery’s theories about
    MBOs might hold up as applied to other facts, they are not supported by the facts here.
    This was a case where the supposed prerequisite elements for problematic MBOs did not
    exist: rival bidders faced minimal structural barriers to a deal; extensive due diligence and
    cooperation from the Company helped address any information asymmetries that might
    otherwise imply the possibility of a winner’s curse; and, assuming his value, Mr. Dell
    would have participated with rival bidders.
    Taken as a whole, the market-based indicators of value—both Dell’s stock price and
    deal price—have substantial probative value. But here, after examining the sale process,
    the Court of Chancery summarized that, “[t]aken as a whole, the Company did not establish
    that the outcome of the sale process offers the most reliable evidence of the Company’s
    176
    
    Id. 59 value
    as a going concern.”177 These two statements are not incongruous, and the Court of
    Chancery’s statement is not a rational reason for assigning no weight to market data. There
    is no requirement that a company prove that the sale process is the most reliable evidence
    of its going concern value in order for the resulting deal price to be granted any weight. If,
    as here, the reasoning behind the decision to assign no weight to market data is flawed,
    then the ultimate conclusion necessarily crumbles as well—especially in light of the less-
    than-surefire DCF analyses—as demonstrated below.
    In so holding, we are not saying that the market is always the best indicator of value,
    or that it should always be granted some weight. We only note that, when the evidence of
    market efficiency, fair play, low barriers to entry, outreach to all logical buyers, and the
    chance for any topping bidder to have the support of Mr. Dell’s own votes is so compelling,
    then failure to give the resulting price heavy weight because the trial judge believes there
    was mispricing missed by all the Dell stockholders, analysts, and potential buyers abuses
    even the wide discretion afforded the Court of Chancery in these difficult cases. And, of
    course, to give no weight to the prices resulting from the actions of Dell’s stockholders and
    potential buyers presupposes that there is a more plausible basis for determining Dell’s
    value in the form of expert testimony, such as from the petitioners’ expert, who argued that
    his DCF analysis showed the fair value of Dell’s stock is $28.61 per share178—almost three
    177
    
    Id. (emphasis added).
    178
    
    Id. at *45.
    60
    times higher than the unaffected stock price of $9.97 per share179 and more than two times
    higher than the deal price of $13.75 per share.
    D.      The Discounted Cash Flow Analyses
    We pause to note that this appraisal case does not present the classic scenario in
    which there is reason to suspect that market forces cannot be relied upon to ensure fair
    treatment of the minority. Under those circumstances, a DCF analysis can provide the
    court with a helpful data point about the price a sale process would have produced had
    there been a robust sale process involving willing buyers with thorough information and
    the time to make a bid. When, by contrast, an appraisal is brought in cases like this where
    a robust sale process of that kind in fact occurred, the Court of Chancery should be chary
    about imposing the hazards that always come when a law-trained judge is forced to make
    a point estimate of fair value based on widely divergent partisan expert testimony.
    As is common in appraisal proceedings,180 each party—petitioners and the
    Company—enlisted highly paid, well-credentialed experts to produce DCF valuations.181
    179
    See 
    id. at *17;
    see also 
    id. (noting that
    the deal price reflected an “approximately 37% premium
    over the ninety-day-average unaffected trading price of $9.97”).
    180
    See, e.g., DFC, 
    2017 WL 3261190
    , at *31 (describing “briefs and expert reports written by
    highly-skilled litigators in concert with men and women of valuation science that often come to
    ridiculously varying positions”).
    181
    Folk, supra note 129, § 262.10, at 9-235 to 9-236 (describing the DCF methodology as “based
    on the premise that the value of a company is equal to the present value of its projected future cash
    flows.”); Jesse A. Finkelstein & John D. Hendershot, Appraisal Rights in Mergers and
    Consolidations, 38-5th C.P.S. § V, at A-37 to A-38 (BNA) (noting that the “DCF methodology
    rests on three basic components: (i) projections of operating cash flows, (ii) terminal value, and
    (iii) the discount rate”—but that the outcomes using this “basic structure” can vary greatly
    depending on the assumptions and methods employed).
    61
    But their valuations landed galaxies apart—diverging by approximately $28 billion, or
    126%.182 Petitioners’ expert arrived at a per-share valuation of $28.61 as of the merger
    date, and the Company’s expert produced a valuation of $12.68 per share. The Court of
    Chancery recognized that “[t]his is a recurring problem,”183 and even believed the “market
    data is sufficient to exclude the possibility, advocated by the petitioners’ expert, that the
    Merger undervalued the Company by $23 billion.”184                     Thus, the trial court found
    petitioners’ valuation lacks credibility on its face. We agree. Yet, the trial court believed
    it could reconcile these enormous valuation chasms caused by the over 1,100 variable
    inputs in the competing DCFs and construct a DCF that more appropriately reflected the
    fair value of Dell’s stock than the market data.185 And, reconciling the various agreements
    and divergences among the experts, the trial court determined fair value to be $17.62.
    To underscore our concern with the Court of Chancery’s decision to give no weight
    to Dell’s stock market price or the deal price and, instead, arrive at a value nearly $7 billion
    above the transaction price, we consider the trial court’s concluding explanation for its
    reasoning:
    182
    Dell Trial Fair Value, 
    2016 WL 3186538
    , at *45.
    183
    Id.
    184
    
    Id. at *44.
    We calculate the differential to be $26 billion, not $23 billion.
    185
    But see In re SWS Group, Inc., 
    2017 WL 2334852
    , at *11 (Del. Ch. May 30, 2017) (observing
    that a DCF calculation is “only as reliable as the inputs relied upon and the assumptions underlying
    those inputs”); Huff Fund Inv. P’ship v. CKx, Inc., 
    2013 WL 5878807
    , at *1 (Del. Ch. Nov. 1,
    2013) (“[T]he unpredictable nature of the income stream from the company’s primary asset renders
    the apparent precision of the expert witnesses’ cash flow valuation illusory”), adhered to, 
    2014 WL 2042797
    (Del. Ch. May 19, 2014), judgment entered sub nom., Huff Fund Inv. P’ship v. CKX,
    Inc. (Del. Ch. June 17, 2014).
    62
    The fair value generated by the DCF methodology comports with the
    evidence regarding the outcome of the sale process. The sale process
    functioned imperfectly as a price discovery tool, both during the pre-signing
    and post-signing phases. Its structure and result are sufficiently credible to
    exclude an outlier valuation for the Company like the one the petitioners
    advanced, but sufficient pricing anomalies and disincentives to bid existed to
    create the possibility that the sale process permitted an undervaluation of
    several dollars per share. Financial sponsors using an LBO model could not
    have bid close to $18 per share because of their IRR requirements and the
    Company’s inability to support the necessary levels of leverage. Assuming
    the $17.62 figure is right, then a strategic acquirer that perceived the
    Company’s value could have gotten the Company for what was
    approximately a 25% discount. [But g]iven the massive integration risk
    inherent in such a deal, it is not entirely surprising that HP did not engage
    and that no one else came forward. Had the valuation gap approached what
    the petitioners’ expert believed, then the incentives to intervene would have
    been vastly greater.
    Because it is impossible to quantify the exact degree of the sale process
    mispricing, this decision does not give weight to the Final Merger
    Consideration. It uses the DCF methodology exclusively to derive a fair
    value of the Company.186
    What this statement means is that the Court of Chancery’s DCF value was the antithesis of
    any economist’s definition of fair market value. The Court of Chancery conceded that its
    DCF value did not reflect a value deemed attractive to the buyers of Dell’s 1,765,369,276
    publicly traded shares. Further, it did not reflect the value that private equity buyers
    (including the biggest players such as KKR, TPG, and Blackstone) put on it, as it was too
    high for any of them to pay. The trial court also picked a price higher than any strategic
    would pay because, in economic terms, no strategic believed it could exploit a purported
    $6.8 billion value gap because the risks and costs of acquiring Dell and integrating it into
    186
    Dell Trial Fair Value, 
    2016 WL 3186538
    , at *51.
    63
    its company dwarfed any potential for profit and synergy gains if Dell were purchased at
    the Court of Chancery’s determination of fair value.187 And, of course, as to all buyers,
    strategic and financial, the Court of Chancery found that a topping bid put them at hazard
    of overpaying and succumbing to a winner’s curse.
    When an asset has few, or no, buyers at the price selected, that is not a sign that the
    asset is stronger than believed—it is a sign that it is weaker. This fact should give pause
    to law-trained judges who might attempt to outguess all of these interested economic
    players with an actual stake in a company’s future. This is especially so here, where the
    Company worked hard to tell its story over a long time and was the opposite of a
    standoffish, defensively entrenched target as it approached the sale process free of many
    deal-protection devices that may prevent selling companies from attracting the highest bid.
    Dell was a willing seller, ready to pay for credible buyers to do due diligence, and had a
    CEO and founder who offered his voting power freely to any topping bidder.
    Given that we have concluded that the trial court’s key reasons for disregarding the
    market data were erroneous, and given the obvious lack of credibility of the petitioners’
    DCF model—as well as legitimate questions about the reliability of the projections upon
    which all of the various DCF analyses are based—these factors suggest strong reliance
    upon the deal price and far less weight, if any, on the DCF analyses.
    In addition to the relatively sound economic reasons, there are also important policy
    reasons supporting this result. If the reward for adopting many mechanisms designed to
    187
    The trial court did not cite any evidence for the “massive integration risk” that it believed to
    exist, and we find none in the record. See 
    id. 64 minimize
    conflict and ensure stockholders obtain the highest possible value is to risk the
    court adding a premium to the deal price based on a DCF analysis, then the incentives to
    adopt best practices will be greatly reduced. Although widely considered the best tool for
    valuing companies when there is no credible market information and no market check,
    DCF valuations involve many inputs—all subject to disagreement by well-compensated
    and highly credentialed experts—and even slight differences in these inputs can produce
    large valuation gaps. Here, management’s projections alone involved more than 1,100
    inputs, and the experts’ fair value determinations (which also included several novel tax
    issues discussed below) landed on different planets.         Rather than gambling on an
    appraisal’s battle of the experts, transactional planners might instead propose alternative
    routes (such as squeeze-outs) to CEOs and founders that will be less attractive for
    diversified investors in public companies and will likely result in going-private transactions
    occurring at a lower, not higher, value.
    Despite our sentiments, to aid the Court of Chancery if it justifies granting any
    weight to the DCF on remand, we address the specific issues raised by the parties in their
    appeals and cross-appeals.
    i.   Tax Issues
    We note at the outset that the Company challenges the Court of Chancery’s
    treatment of somewhat novel tax issues.         These issues involve highly fact-specific,
    subjective determinations—the outcomes of which can cause wide differences in the
    65
    ultimate DCF valuation.188 The parties have focused proportionately little attention on
    these issues before this Court, adding to our inclination to defer to the trial court, or remand
    for further consideration, where the record before us is not sufficiently developed on these
    complex, technical issues.
    a. Terminal Period Tax Rate
    Dell argues that the Court of Chancery abused its discretion in using Dell’s 21%
    effective tax rate, rather than the top marginal tax rate under U.S. law (and an addition for
    state taxes) in its model’s terminal period. But this effective tax rate reflected the
    Company’s operative reality as of the merger date, and the evidence supports the Court of
    Chancery’s decision that this operative reality was likely to continue. There is precedent
    favoring adopting tax rates consistent with the operative reality of the company under
    consideration.189 The 21% tax rate is just that—in line with Dell’s history and apparently
    consistent with its tax-paying future. For example, Dell paid effective tax rates ranging
    from 16.5% to 29.2% in the five years before the Merger190—including an average of
    18.5% in the three years preceding the Merger191—so 21%, the tax rate selected by
    188
    For example, in its opening brief, the Company aggregates the three asserted “tax errors” as
    follows: FIN 48 ($1.34 billion), repatriation tax error ($1.28 billion), and marginal tax rate error
    ($1.71 billion), totaling, potentially, $4.33 billion. Appellant’s Opening Br. at 52. The Company
    claims that the aggregate impact of these alleged errors lowers the court’s $17.62 per share
    valuation to $13.29 per share. 
    Id. 189 See,
    e.g., Global 
    GT, 993 A.2d at 514
    ; Dell Trial Fair Value, 
    2016 WL 3186538
    , at *48 n.49
    (collecting cases).
    190
    
    Id. at *48.
    191
    See Pretrial Stipulation & Order, entered Sept. 30, 2015, at A95 ¶¶ 290-92.
    66
    management, is right in the ballpark. JPMorgan and Evercore also used a tax rate of 21%
    in the terminal periods of their own DCF calculations.192
    In contrast, in advocating that we apply the marginal tax rate of 35% plus 0.8% for
    state taxes to all Dell’s earnings in the terminal period, the Company urges us to adopt a
    tax rate that Dell never paid and has no plans of paying. Given the ample reasons to apply
    the 21% effective tax rate to the terminal period, the Court of Chancery did not abuse its
    discretion.
    b. Deferred Taxes
    We find that the Court of Chancery erred in its conclusion that the effective tax rate
    accounted for the inevitable taxes that the Company would have to pay upon repatriating
    its foreign earnings and profits and, thus, remand for further consideration of what
    repatriation deduction is necessary.
    Cash flows need to be available to stockholders in order to add value as part of a
    company’s going concern. And, to be available to stockholders, the cash needs to be in the
    United States. Further, in order to be in the United States, foreign earnings and profits
    must be subjected to taxation when they return to the country, i.e., upon repatriation.
    The trial court’s free cash flow projections in its DCF valuation include all earnings,
    both domestic and foreign. The Court of Chancery’s model also applied the same effective
    192
    E.g., JPMorgan Project Denali - Model Outputs Presentation (Jan. 15, 2013), at B504, B507;
    Evercore Partners Discounted Cash Flow Model (Feb. 6, 2013), at B590; Evercore Partners
    Discounted Cash Flow Model (Aug. 1, 2013), at B782; JPMorgan Project Denali Model
    Presentation (Aug. 14, 2013), at A2612, A2614.
    67
    tax rate to all of those cash flows because, indeed, the effective tax rate is the aggregate tax
    rate covering both domestic and foreign earnings: it is lower than the statutory marginal
    tax rate to account for the lower tax rates applied to income earned abroad, adjusted against
    the proportion of income coming from each of the respective foreign jurisdictions.193
    But the Court of Chancery’s analysis cannot end there. Though the effective tax
    rate accounts for the disparate tax treatment of Dell’s income in various jurisdictions,
    including various tax holidays, it does not account for the tax consequence upon
    repatriation,194 as the Court of Chancery believed.195 Thus, to cure the existing asymmetry
    in the Court of Chancery’s model, i.e., the model’s inclusion of foreign earnings and profits
    in cash flow without any corresponding tax consequences upon repatriation, the Company
    193
    See Form 10-K 2013, supra note 9, at A2013 (“Our effective tax rate can fluctuate depending
    on the geographic distribution of our world-wide earnings, as our foreign earnings are generally
    taxed at lower rates than in the U.S. In certain jurisdictions, our tax rate is significantly less than
    the applicable statutory rate as a result of tax holidays . . . . The differences between our effective
    tax rate and the U.S. federal statutory rate of 35% principally resulted from the geographical
    distribution of taxable income discussed above and permanent differences between the book and
    tax treatment of certain items.”); 
    id. at A1986
    (“[A]ny actions by [the Company] to repatriate non-
    U.S. earnings for which we have not previously provided for U.S. taxes may impact our effective
    tax rate.”).
    194
    
    Id. at A2016
    (“We have provided for the U.S. federal tax liability on these amounts [i.e., foreign
    income] for financial statement purposes, except for foreign earnings that are considered
    permanently reinvested outside of the U.S.”) (emphasis added).
    195
    See Dell Trial Fair Value, 
    2016 WL 3186538
    , at *50 (“The Company’s CFO testified that the
    effective tax rate includes deferred taxes, and that the Company’s cash tax rate is lower than the
    effective rate because the effective tax rate includes substantial deferred tax liabilities. In other
    words, the effective tax rate accounts for the deferred taxes . . . .”). However, Dell’s CFO only
    testified that the Company’s effective rate has been lower than the marginal rate of 35% because
    “income that’s earned in foreign jurisdictions, meaning outside the U.S., is taxed at a lower tax
    rate.” Transcript of Thomas Sweet Trial Testimony (Oct. 5, 2015), at A437 [hereinafter Sweet
    Testimony]; see also supra notes 193 and 194.
    68
    is right that the model needs to account for the additional, previously-unaccounted-for tax
    consequence of repatriation.
    However, the Company’s proposed $2.24 billion deduction appears excessive as it
    assumes tax rates of over 30% upon repatriation.196 Dell’s operative reality shows that the
    Company has never paid close to that rate when repatriating foreign earnings and profit197
    and had no plans to repatriate vast amounts of money in the foreseeable future.198 In fact,
    in the past twenty years, Dell only repatriated “significant” amounts of such earnings
    during repatriation tax holidays199 and never paid more than 5.25% on such earnings and
    profit.200 Thus, contrary to the Company’s proposal, it seems consistent with its operative
    reality to assume that Dell would only repatriate such earnings and profit when it would be
    subject to as little tax as possible, signaling that the Company’s proposed $2.24 billion
    deduction is too big.
    We remand this issue for further consideration given that the effective tax rate does
    not account for the future cost of repatriating Dell’s foreign earnings. On remand, if the
    Court of Chancery decides to rely upon a DCF as part of its award, it has the discretion to
    196
    See Corrected Expert Report of Stephen Shay (Aug. 26, 2015), at A4343; Stephen Shay Trial
    Demonstrative No. 5 at A4372.
    197
    Dell never paid the full marginal tax rate when repatriating, see Transcript of Stephen Shay
    Trial Testimony (Oct. 7, 2015), at A1133 [hereinafter Shay Testimony], but the Company’s
    proposed deferred tax deduction used in its DCF model assumes that its repatriation taxes will be
    paid at the full marginal rate.
    198
    Form 10-K 2013, supra note 9, at A2063 (noting that Dell intended to reinvest foreign earnings
    abroad “indefinitely”).
    199
    Dell Trial Fair Value, 
    2016 WL 3186538
    , at *48. Dell repatriated $4 billion during a 2004 tax
    holiday and $9 billion during a 2013 tax holiday. 
    Id. 200 Expert
    Report of John P. Steines, Jr. (July 24, 2015), at B2377-78.
    69
    seek additional input from the parties, and from a court-appointed expert, to resolve this
    issue. We do not dictate any outcome other than that the court’s treatment of Dell’s foreign
    earnings must include its corresponding tax consequences.         That is, if the Court of
    Chancery chooses to include foreign earnings in its analysis, it should adjust its model to
    include some rational tax consequence upon repatriation. Otherwise, the court should
    exclude those earnings, consistent with its own assumption that they will be reinvested
    abroad indefinitely and thus never available to pay the Company’s stockholders.
    c. FIN 48
    Dell’s final tax argument on appeal is that the Court of Chancery abused its
    discretion by reducing its calculation by only $650 million instead of $3.01 billion to
    account for possible tax liability that the Company could face if tax authorities ultimately
    disagree with its positions on certain tax issues.
    This is a complicated issue for many reasons, not the least of which is the absence
    of guidance in respected valuation treatises as to how to account for a so-called FIN 48
    reserve when conducting a DCF valuation. FIN 48 is the Financial Accounting Standards
    Board interpretive statement that requires companies to create a reserve to account for tax
    benefits that are too uncertain to be recognized in a company’s financial statements.201
    Applying this guidance, Dell created a $3.01 billion FIN 48 reserve based on its
    view that it was more likely than not that $3.01 billion would be due if Dell’s positions on
    certain tax issues were contested. But, in its DCF valuation, the Court of Chancery only
    201
    Fin. Acct. Standards Bd., FASB Interpretation No. 48: Accounting for Uncertainty in Income
    (2006) (codified at FASB Accounting Standards Codification 740-10-55-3) [hereinafter FIN 48].
    70
    subtracted $650 million from its enterprise value, not the full $3.01 billion. On appeal,
    Dell argues that this was error because the Court of Chancery misunderstood the FIN 48
    standard and therefore failed to include the full reserve amount.
    Dell is correct as to one part of its argument. In its decision, the trial court collapsed
    the two-step process for creating this reserve by stating that the FIN 48 reserve “measures
    the tax payment a company expects to pay if a taxing authority disagrees with its position
    even though it thinks it is more likely than not that its position is correct.”202 In fact, as the
    first step in creating the FIN 48 reserve, a company recognizes “the financial statement
    effects of a tax position when it is more likely than not, based on the technical merits, that
    the position will be sustained upon examination.”203 Then, as the second step, a company
    must maintain as a liability on its balance sheet “unrecognized tax benefits, which are the
    differences between a tax position taken or expected to be taken in a tax return and the
    benefit recognized . . . .”204
    But the problem for Dell is that the error of the Court of Chancery does not translate
    directly into reversible error for an important reason. There is no agreement in the record
    that all of a FIN 48 reserve should be deducted when conducting a DCF analysis, and Dell
    has not cited corporate finance literature supporting its argument that the entirety of a FIN
    48 reserve must be deducted. To be fair, Dell has cited corporate finance literature saying
    202
    Dell Trial Fair Value, 
    2016 WL 3186538
    , at *50.
    203
    FIN 48, supra note 201, ¶ 6.
    204
    
    Id. ¶ 17
    (emphasis added).
    71
    that the potential for tax liability has to be considered in calculating enterprise value.205
    But, assuming that is right, Dell did not present a persuasive way of doing so when, as
    under FIN 48, the reserve is dealing with probabilities and, therefore, there is a need to
    decide on the amount of the reserve to be deducted. In fact, Dell’s own expert testified that
    the question of how to treat FIN 48 reserves was not a common one and that he was
    unaware of any appraisal treatise that directs appraisers to deduct all of a FIN 48 reserve
    when calculating enterprise value.206 By definition, a reserve based on a more likely than
    not standard has a fairly large degree of uncertainty. And, there was factual testimony here
    that provided a factual basis for the Court of Chancery’s determination to deduct only $650
    million.
    In his trial testimony, Dell’s CFO spoke directly to the likelihood that Dell would
    face liability on the reserved amounts. That testimony indicated that, between 2013 and
    2018, $650 million was the amount of Dell’s FIN 48 reserve that was most likely to come
    205
    See Appellant’s Opening Br. at 44 n.21 (stating that “there ‘may be other claims on the firm
    that do not show up in debt that you should subtract from firm value’ and specifically calling out
    contingent liabilities” (quoting Asworth Damodaran, Investment Valuation 441 (3d ed. 2012)));
    see also Appellant’s Reply Br. 26 (citing Shannon Pratt & Roger Grabowski, Cost of Capital:
    Applications and Examples 542 (5th ed. 2014) [hereinafter Cost of Capital] (“Liabilities for either
    current or prior period issues, such as potential judgments or settlements for ongoing litigation,
    proposed or potential adjustments to prior income taxes and environmental cleanup costs, are real
    liabilities that should be subtracted from the overall business valuation as of the valuation date but
    are not considered part of the ongoing capital structure of the entity.”)) (emphasis added).
    206
    Transcript of Glenn Hubbard Trial Testimony (Oct. 7, 2015), at A874-76; see also Cost of
    Capital, supra note 205, at 542 [hereinafter Hubbard Testimony] (“Valuation of contingent
    liabilities requires consideration of the probabilities of payment and the possible timing. The
    possible outcomes must be converted to an estimate of the present value of the expected amount
    of the ultimate payment and whether it will be deductible for income tax royalties resulting from
    the liability.”).
    72
    due.207 Given that there is uncertainty in the valuation literature and the record about the
    extent to which a FIN 48 reserve should be deducted from enterprise value, we cannot find
    that the Court of Chancery’s decision to deduct only the $650 million that was most likely
    to come due in the near future was an abuse of discretion.
    Not only that, but there is evidence in the record that the Company’s calculation of
    its effective tax rate took into account the FIN 48 reserve.208 Thus, by deducting the portion
    of the FIN 48 reserve that the record evidence showed was most likely to come due, and
    adopting an effective tax rate based in part on consideration of the issues addressed by the
    reserves, the Court of Chancery’s decision was grounded in the record.
    We are reluctant to speak broadly about this issue because the record below and
    before us is devoid of reliable guidance about how FIN 48 reserves should be treated in the
    207
    Sweet 
    Testimony, supra
    note 195, at A470–71.
    208
    See, e.g., Sweet 
    Testimony, supra
    note 195, at A480-81; Shay 
    Testimony, supra
    note 197, at
    A1148-49, 1152-56, A1153-55; see also Form 10-K 2013, supra note 9, at A2064.
    PETITIONERS’ COUNSEL: So all of the years building up to your big 3 billion
    [FIN 48 Reserve] in 2013 was all in Dell’s effective tax rate. Right? . . .
    SHAY: [T]he answer is yes for the years that you’re describing . . . . [B]ecause I
    referred to the two years, 2012 and 2013, to derive the effective tax rate that I
    recommended or opined to Mr. Hubbard that he use for the projection and transition
    period, yes, the FIN 48 amount is in that effective rate that’s applied to the earnings
    that are used in those cash flows.
    Shay 
    Testimony, supra
    note 197, at A1153-55. Petitioners’ expert did not include a separate
    deduction for the FIN 48 reserve: he assumed Dell would have accounted for the FIN 48 reserve
    when calculating the effective tax rate of 21%, which he applied to all cash flows. See Transcript
    of Bradford Cornell Trial Testimony (Oct. 5, 2015), at A277, A281-82; Dell Trial Fair Value,
    
    2016 WL 3186538
    , at *48. The appellees do not argue on cross-appeal that it was error for the
    Court of Chancery to exclude the $650 million of the FIN 48 reserve that Dell’s CFO testified was
    most likely to be owed during the projection period.
    73
    calculation of a DCF. The unreliability of the record and our duty to respect the difficult
    task of trial judges in these cases leaves us unprepared to disturb the Court of Chancery’s
    ultimate finding on this issue, despite its misstatement of the FIN 48 standard.
    ii.   Cross-Appeals
    Petitioners cross-appealed alleging that, to the extent the Court of Chancery erred in
    formulating its DCF, it did so by adopting the revisions that Dell’s expert applied to the
    BCG 25% Case projections and including deductions for working capital and restricted
    cash. We find that these choices do not amount to an abuse of discretion.209
    a.     Projection Adjustments
    The Court of Chancery did not abuse its discretion in adjusting the BCG 25% Case
    projections, which it factored into one of the two DCF calculations that it later averaged to
    arrive at its final determination of fair value. Though petitioners argue that the BCG 25%
    Case underestimated cost savings,210 both experts agreed that it was largely reliable.211
    209
    BCG’s projections included three different cases. The “BCG Base Case” was more pessimistic
    than management’s “September Case.” The two other cases assessed the likelihood of achieving
    cost-saving initiatives. One assumed that Dell would realize 25% of management’s intended cost
    savings (the “BCG 25% Case”), and the other assumed that the Company would realize 75% of
    the savings (the “BCG 75% Case”). Dell Trial Fair Value, 
    2016 WL 3186538
    , at *10.
    210
    See Appellees’ Ans. Br. at 62 (arguing that the Court of Chancery erred by adopting “a set of
    projections that assumed Dell would take out less in costs over a three-year period than it had
    already taken out by the end of FY 2014.”).
    211
    Dell Trial Fair Value, 
    2016 WL 3186538
    , at *45.
    74
    Petitioners’ attorney also conceded at oral argument that “[e]veryone agrees that th[e] BCG
    25% Case] is the best set of projections.”212
    Petitioners also question the decision of Dell’s expert, Hubbard, to update the
    projections to reflect the latest pre-Merger IDC report (August 2013) that suggested PC
    sales would continue to decline even further than anticipated industry-wide. Given that
    BCG had previously adjusted its projections to account for new IDC forecasts,213 it would
    seem to make sense that the projections as of the date of the Merger would need to include
    the most recent figures.
    But petitioners argue that the projections’ creator, Lutao Ning of BCG, testified at
    trial that one could not simply swap out old IDC data for new figures214 and that, regardless,
    the IDC numbers only corroborated the accuracy of BCG’s projections because the
    projections forecasted such declines.215 We defer to the Court of Chancery’s assessment
    of this testimony and its decision to adjust for the latest IDC report, especially since the
    trial court attempted to balance the “likely somewhat conservative” Adjusted BCG 25%
    Case against the “likely somewhat optimistic” adjusted Bank Case projections in the
    212
    Oral Argument before the Delaware Supreme Court at 42:11, https://livestream.com/accounts/
    5969852/events/7748349/videos/163426742.
    213
    After initially providing its projections to the Special Committee on January 2, 2013, BCG
    “updated its projections slightly to account for new information from the bankers and a new IDC
    data set.” Dell Trial Fair Value, 
    2016 WL 3186538
    , at *10. BCG did not update its projections
    after January 2013. 
    Id. at *45.
    214
    Transcript of Lutao Ning Trial Testimony (Oct. 6, 2015), at A676-77.
    215
    
    Id. at A681-83.
    75
    court’s final fair value determination.216 It averaged two DCF valuations using all the same
    inputs other than these two sets of projections in arriving at its final fair value figure. This
    choice, which is unchallenged, was designed to minimize any over-pessimism in tweaking
    the IDC numbers. The Court of Chancery had logic for its adjustment to the projections,
    and this adjustment did not amount to an abuse of discretion.
    b. Cash
    Petitioners also challenge the Court of Chancery’s deductions of $3 billion for
    working capital and $1.2 billion for restricted cash from Dell’s enterprise value. Neither
    of these judgment calls amounts to an abuse of discretion.
    Dell’s CFO testified that the Company needed at least $5 billion in working
    capital217 to support its operations (including $2 billion restricted cash),218 and
    documentary evidence corroborates this view.219 It was reasonable for the Court of
    Chancery to believe this evidence supported the working capital deduction. Dell’s CFO
    testified that the Company needed cash on hand to accommodate “seasonality” and
    216
    See Dell Trial Fair Value, 
    2016 WL 3186538
    , at *47, *51 (noting that the court had “no reason
    to prefer one realistic case over the other”).
    217
    “Working capital is derived by subtracting current liabilities from current assets and represents
    the capital the business has at its disposal to fund operations.” Merion Capital, L.P. v. 3M Cogent,
    Inc., 
    2013 WL 3793896
    , at *13 (Del. Ch. July 8, 2013), judgment entered sub nom. Merion
    Capital, L.P v. 3M Cogent, Inc. (Del. Ch. July 23, 2013) (quoting Gholl v. Emachines, Inc., 
    2004 WL 2847865
    , at *14 n.97 (Del. Ch. Nov. 24, 2004)).
    218
    Sweet 
    Testimony, supra
    note 195, at A431-33.
    219
    Working Capital Update (Jan. 2013), at AR3; Denali Acquiror Inc. Rating Agency Presentation
    (Aug. 2013), at AR48; LBO Project Update - Treasury Ops (Sept. 3, 2013), at AR85; Silver Lake,
    “Project Denali Illustrative LBO & Operating Model” Presentation (Sept. 17, 2013), at AR99.
    76
    “geographical friction,”220 and the Court of Chancery did not abuse its discretion in
    crediting this testimony.
    The Court of Chancery also did not abuse its discretion in deducting $1.2 billion of
    the $2 billion deduction for restricted cash advocated by the Company.221 The trial court
    did not deduct $0.8 billion of that total because evidence showed it had become unrestricted
    before the Merger and thus could no longer be counted among the restricted pool.222 There
    was some evidence at the time of the Merger that some Chinese regulations that restricted
    much of the cash were changing so as to allow Dell to access it and thus also eliminate the
    need for a portion of the remaining $1.2 billion deduction.223 But the record does not
    specify how much capital was likely to become unrestricted. Thus, we defer to the Court
    of Chancery’s judgment in declining to shrink the deduction even further in light of the
    sparse record on restricted cash.
    III.   Fair Value Conclusion
    Despite the sound economic and policy reasons supporting the use of the deal price
    as the fair value award on remand, we will not give in to the temptation to dictate that
    result. That said, we give the Vice Chancellor the discretion on remand to enter judgment
    at the deal price if he so chooses, with no further proceedings. If he decides to follow
    220
    Sweet 
    Testimony, supra
    note 195, at A432-33.
    221
    
    Id. at A431,
    A433.
    222
    Dell Trial Fair Value, 
    2016 WL 3186538
    , at *50. Dell’s expert admitted at trial that the
    restricted cash deduction would be unnecessary if Dell could ever access the money. See Hubbard
    
    Testimony, supra
    note 206, at A867-70. Dell’s expert explained, “If you could bring it back
    costlessly today, you shouldn’t be subtracting it.” 
    Id. at A869.
    223
    Sweet 
    Testimony, supra
    note 195, at A433-34.
    77
    another route, the outcome should adhere to our rulings in this opinion, including our
    findings with regard to the DCF valuation. If he chooses to weigh a variety of factors in
    arriving at fair value, he must explain that weighting based on reasoning that is consistent
    with the record and with relevant, accepted financial principles.
    IV.   Attorneys’ Expenses and Fees
    One final thing—our reversal of the Court of Chancery’s fair value determination
    does not resolve all the appeals before us. A cross-appeal from the petitioning party with
    the greatest number of shares actually entitled to appraisal, Magnetar Capital Master Fund
    Ltd, and a few other petitioners represented by the same law firms224 challenges the Court
    of Chancery’s allocation of expenses. These cross-appellants contend that the Court of
    Chancery abused its discretion225 in allocating all of the expenses incurred by Lead
    Counsel226 in litigating the fair value determination among only those shares actually
    entitled to appraisal. The cross-appellants’ shares accounted for just 14% of the shares that
    initially demanded appraisal, and thus the cross-appellants argue that it was unfair for the
    court to saddle them with all the expenses while allowing T. Rowe Price & Associates (“T.
    Rowe”), which was initially the largest petitioner, to avoid paying anything.
    The appraisal class was originally much larger than the 5,505,730 shares ultimately
    deemed entitled to appraisal. A total of 38,765,130 shares initially demanded appraisal,
    224
    Heyman Enerio Gattuso & Hirzel LLP and Lowenstein Sandler LLP.
    225
    See Scion Breckenridge Managing Member v. ASB Allegiance Real Estate Fund, 
    68 A.3d 665
    ,
    675 (Del. 2013) (reviewing fee award for abuse of discretion).
    226
    Grant & Eisenhofer P.A.
    78
    and Lead Counsel obtained that status because it represented 83% of those shares. The
    Company challenged the entitlement to appraisal of many of those shares. A group of
    entities tied to T. Rowe beneficially owned a large portion of the disputed shares,
    26,732,930 shares. But though the qualifications of those shares were contested, the parties
    agreed to delay resolution of their entitlement until after the fair value trial. Lead Counsel
    thus retained its status and litigated the fair value trial.
    After trial, the Court of Chancery ultimately held that T. Rowe’s shares had actually
    voted for the Merger and thus were not entitled to appraisal. T. Rowe had the option to
    appeal that decision.
    But T. Rowe soon gained settlement leverage from the post-trial decision on fair
    value a few weeks later: the decision awarded $3.87 per share more than the deal price to
    the shares entitled to appraisal. Given the threat that T. Rowe might appeal the decision
    on its entitlement to appraisal and, if it succeeded, be entitled to the higher fair value award
    (if that also survived an appeal), T. Rowe was able to strike a settlement with the Company
    for the Merger consideration plus $28 million in interest.227 (Lead Counsel received $4.2
    million of that amount as its contingency fee.)228
    Although T. Rowe benefitted from the fair value award through settlement leverage,
    Lead Counsel chose not to allocate any of its expenses from the fair value litigation to T.
    227
    Dell Fees & Expenses, 
    2016 WL 6069017
    , at *5.
    228
    
    Id. 79 Rowe.
    Rather, Lead Counsel sought an additional benefit for its client by requesting its
    expenses be paid only by those shares that the trial court actually found entitled to appraisal.
    Magnetar objected. (Its 3,865,820 shares accounted for more than 70% of the final
    appraisal class.)229 But the Court of Chancery denied its objection. First, the Court of
    Chancery held that it could not require T. Rowe to bear any of the expenses because Section
    262(j) provides that the Court of Chancery has discretion to “order all or a portion of the
    expenses” incurred through the appraisal proceedings “pro rata against the value of all the
    shares entitled to an appraisal.”230 The Court of Chancery had held that T. Rowe’s shares
    were actually not entitled to appraisal. Thus, the court relied on the statutory language in
    deciding not to award expenses against T. Rowe and, instead, allocated the expenses
    against the rightful appraisal class—those entitled to appraisal—even though Section
    262(j) also provides that the court may allocate merely “a portion” of such expenses against
    those shares. The court found the expenses “proportionate to the benefit achieved,” as also
    measured against the size of the final appraisal class, and thus deemed it reasonable to
    apportion them among solely the shares entitled to appraisal.231
    At the same time, the trial court acknowledged that, despite the language of Section
    262(j), it “could achieve the same functional result [sought by Magnetar] simply by
    229
    
    Id. at *2
    , *4. Following various rulings, 5,505,730 shares remained in the appraisal class. 
    Id. at *4.
    This was a reduction of approximately 86% from the 38,765,130 shares that originally
    appeared on the verified list. 
    Id. at *4,
    *12.
    230
    
    8 Del. C
    . 262(j) (emphasis added).
    231
    Dell Fees & Expenses, 
    2016 WL 6069017
    , at *12 (“[T]he expenses of appraisal litigation do
    not scale proportionately with the size of the appraisal class.”).
    80
    reducing the total amount of expenses that it awards to [Lead Counsel], because a reduced
    award would force [Lead Counsel] to bear those expenses in the first instance and likely
    seek reimbursement from T. Rowe.”232 But the Court of Chancery resisted that approach
    because it viewed Magnetar’s requested allocation as “really an effort to reduce their share
    of the expenses.”233
    We conclude that the resulting allocation was inequitable and cannot stand. Even
    if the Court of Chancery objected to Magnetar’s requested apportionment of expenses, the
    trial court surely had the capacity to craft a reasonable and equitable solution—one that
    takes into account T. Rowe’s relationship with Lead Counsel, their control of the litigation,
    and the reciprocal benefits they obtained as a result.
    We fail to see how the Court of Chancery could refuse to reduce the amount of
    expenses owed by Magnetar and other stockholders entitled to appraisal to account in some
    balanced and fair way for the benefits that Lead Counsel obtained through its representation
    of T. Rowe and that T. Rowe obtained thanks to the fair value award and the settlement
    leverage it gained by delaying resolution of its entitlement to appraisal until after trial.
    Section 262(j) plays an important role in preventing free-riding by petitioners at the
    expense of other petitioners. That role also includes not enabling unfair opportunism by a
    large petitioner who wields its clout to secure control of an appraisal and then uses the
    232
    
    Id. 233 Id.
    81
    leverage of the appraisal to obtain a favorable settlement at a time when its entitlement to
    appraisal is in doubt and subject to definitive resolution on appeal.
    Given our rulings on fair value here, we decline to address the precise manner in
    which the Court of Chancery must account on remand for T. Rowe’s role in this litigation,
    its relationship with Lead Counsel, and the benefits it obtained. But we hold that it must
    do so. Although the Court of Chancery need not award expenses against T. Rowe, it must
    make a reasoned and sizable reduction in those awarded against the shares entitled to
    appraisal to account for the fair share T. Rowe should have borne, but that Lead Counsel
    chose not to seek from it. To the extent Lead Counsel wished to cut T. Rowe a break, it
    should not have done so against the other petitioners to whom it owed a fiduciary duty as
    Lead Counsel.
    Consistent with this decision, we grant Magnetar leave to seek a reasonable fee from
    other petitioners who benefit from its efforts to reduce the expense award against the shares
    entitled to appraisal, and the Court of Chancery shall consider any such application in the
    course of resolving any further dispute about expenses that arises on remand.
    82
    

Document Info

Docket Number: 565, 2016

Citation Numbers: 177 A.3d 1

Judges: Valihura J.

Filed Date: 12/14/2017

Precedential Status: Precedential

Modified Date: 1/12/2023

Authorities (17)

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Alabama By-Products Corp. v. Neal , 588 A.2d 255 ( 1991 )

Cinerama, Inc. v. Technicolor, Inc. , 663 A.2d 1134 ( 1994 )

Tri-Continental Corporation v. Battye , 31 Del. Ch. 523 ( 1950 )

In Re the Appraisal of Shell Oil Co. , 607 A.2d 1213 ( 1992 )

Rapid-American Corp. v. Harris , 603 A.2d 796 ( 1992 )

Cinerama, Inc. v. Technicolor, Inc. , 663 A.2d 1156 ( 1995 )

Weinberger v. UOP, Inc. , 457 A.2d 701 ( 1983 )

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