A dissenting shareholder is any stockholder of the company holding dissenting shares as of the effective time. These shares will have appraisal rights properly demanded (and not withdrawn or lost) in accordance with the appropriate jurisdictional law in connection with the merger. This course of action is only usually applicable to professional investors or institutions with the resources to effect such a strategy. The amount of shares or dissenting stockholders may provide a clue however to the shareholder response to a proposed deal. This is a concept of which all traders should be aware.
Dissenting Shareholder Action
To perfect appraisal rights, the dissenting shareholder must follow the requirements set out in the applicable state statute, or the stockholder permanently risks losing its right to an appraisal. In mergers and acquisitions, the corporation that is the subject of the appraisal demand is the target company. The target must comply with certain procedures to respond to and participate in the appraisal proceeding. Although many states employ a similar structure for a stockholder to perfect these rights, each state has its own unique characteristics to the process. It is important the stockholders is aware of these differences.
An example definition of a dissenting shareholder (or stockholder) given in an SEC filing is as follows
“Dissenting Stockholder” means any holder of shares of Company Common Stock who has not voted such shares in favor of the Merger and who is entitled to assert and properly asserts appraisal rights with respect to such shares pursuant to, and who complies in all respects with, the provisions of Section 262 of the DGCL, and who has not effectively withdrawn or lost the right to assert appraisal rights under the provisions of Section 262 of the DGCL.”
