Document: Shiftan et al. v. Morgan Joseph Holdings, Inc., C.A. No. 6424-CS (Del. Ch. Jan. 13, 2012)
The Delaware Court of Chancery granted summary judgment in favor of petitioners on the issue of whether a mandatory redemption provision, which provided for an automatic redemption of preferred stock six months following a merger giving rise to appraisal rights, was required to be taken into account in the Court’s determination of the “fair value” of the preferred stock. Unlike common stock, the value of preferred stock in an appraisal proceeding is determined solely by reference to the contract rights conferred upon it in the certificate of incorporation. Here, the preferred stock would have been redeemed for $100 per share, just six months after the merger giving rise to appraisal rights, pursuant to a specific, non-speculative, contractual right, which the Court determined was an important economic factor bearing on the value of the preferred stock as of the date of the merger.