You own stock in Fred’s Fanny Shop, which is going to merge with Beth’s Blasphemous Bon Bons. You didn’t want this merger to happen (in fact, you gave it a no-go when a shareholder vote was taken). Further, you’re being told that in this transaction, your stock in Fred’s is being valued so as to be worth a dollar a share. You swear that the value should be higher.
In this instance, you’ll refer to your appraisal rights, which are your rights as a stockholder in a corporation that is merging with or being bought out by another corporation. That is, you have the right to bring in your own expert and have that banker give a fairness opinion as to the fairly appraised value of your assets in the transaction.
Minority shareholders can, by law, ask that a company that is not affiliated with Fanny’s or Fred’s determine the value of stock. This presumably much higher price, as opposed to the crappy price that you were originally approached with, will then be used in the merger, essentially defending the value of your investment in Fred's.
In other words, this is a legal method of protecting you from getting screwed.
Related or Semi-related Video
Finance: What are Systematic and Unsyste...14 Views
finance a la shmoop what are systemic and unsystematic risk systemic risks are
just endemic to the market want to invest in the stock market and compound [Plate of vegetable appear]
return your way into great wealth great but then you'll suffer the normal risk
of the system that risk specifically is this yeah best of times worst of times
but up over time the market goes up you just have to embrace the notion that [Man hugging a tree]
there is systemic risk in that in the short run you can buy an S&P 500 index
fund here then lose like a third or whatever of your money in not too many
years but if you don't panic and sell just at the wrong time here right out
the storm and keep going well then you should be just fine by the time you
arrive here so that's risk that is always in the system equities rise and [Equity in the ocean]
fall like the tides or something like that but generally they rise and if you
want to swim in this bathtub well you get used to the turbulence and have an [Girl swimming against the tide]
airsick bag handy all right that systemic risk or systemic risk
what's unsystematic risk well it's bad investors or rather bad investing it's
panicking and selling your stock just when you should be doubling down its
buying lousy companies thinking that they're cheap today but not realizing [Woman runs away from smelly girl]
that they will always be cheap because they're lousy or in a lousy industry or
run by lousy management it's buying into lousy industries that also look cheap
but are dying hello paper and pulp is yeah anyone really think that's gonna be [Paper printing]
around in 20 years all right well it's believing the dreamy hopes and prayers
of future earnings and trusting that there really will be 5 million [Traffic on the highway]
driverless cars on the road in 3 years you know good luck with that we'd love
it to be true but ain't gonna be unsystematic risk is also investing in
bonds for the long-term taking very little risk when taking little risk is
the opposite of what you should be doing when you're a young investor so yeah
systematic and unsystematic risk both exist plentifully and both can bite you [Dog bites portfolio from woman]
right in the portfolio so you got to know what both are and embrace them
for what they're worth
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