Banks Forgot Who Was Supposed to Own Dell Shares

[Recursion]

http://www.bloombergview.com/articles/2015-07-14/banks-forgot-who-was-supposed-to-own-dell-shares

Fascinating

Here are three stylized facts about stocks:
1. Nobody owns stock. What you own is an entitlement to stock held for you by your broker. But your broker doesn't own the stock either. What your broker owns is an entitlement to stock held for it by Cede & Co., which is a nominee of the Depository Trust Company, which is a company that is in the business of owning everyone's stock for them. This system sounds convoluted but actually makes it easy to keep track of things: If I sell stock to you, I don't have to courier over a paper share certificate, or call up the company and have it change its shareholder register. Our brokers just change some electronic entries at their DTC accounts and everything is cool.
2. If you own stock in a company that gets acquired for cash, you can ask a court to second-guess the merger price and give you the fair value of your stock in cash. A court will "appraise" your stock and order the surviving company in the merger to pay you what it's worth (plus interest), which may be more or less than the deal price. But to get the appraisal, under Delaware law, you need to follow some procedures. In particular, you have to demand appraisal in writing from the company before the shareholder vote, you have to vote against the merger (or abstain), and you have to own the stock continuously from the time you demand appraisal until the merger closes.
3. Every time Fact 1 and Fact 2 interact, the result is invariably nonsense.

...

One level goofier: T. Rowe Price vocally and consistently objected to the 2013 buyout of Dell, sought appraisal for its Dell shares, and then found out that it had actually voted in favor of the buyout. Like, by accident. It just forgot, or something; it's very weird, and not rendered less weird by T. Rowe's statement that it was "aware of a discrepancy in the communication of our voting instruction on the Dell buyout." Oops! From Fact 2, you would think that this would foreclose T. Rowe's appraisal efforts, since unlike Merion it had demonstrably voted in favor of the deal, and the appraisal rules say that that disqualifies you.

Except for Fact 1: T. Rowe Price never owned any shares, and so it never voted any shares. Its ownership, its voting, everything were as shadows flickering on the wall of a cave. Everything that any shareholder thinks it does, Cede & Co. actually does. And, again, Cede voted (enough of) its shares against the deal, so Cede could get appraisal. Here's T. Rowe's lawyer:

"I think the case law is rock solid and the only thing that counts is how the record holder votes its shared," Grant said in an interview. "To me it is cut-and-dried that all of the stock holders who sought appraisal will be entitled to appraisal."

Except! Here's an even goofier thing from yesterday:

A Delaware judge on Monday found that because owners of 922,975 Dell shares failed to continuously hold their stock during the buyout process, they forfeited their rights to challenge the deal price. He blamed legal precedent and quirks of the country’s arcane stock-management system, and expressed frustration at his own ruling.