Can someone enlighten me here? What is the reasoning for allowing people to buy from people who don't want to sell?
Through one reason or another, you and I both own portions of a house. I own 95% of it, and you own 5%.
I want to sell, because I would like to have the money. You believe if we wait a year we will make more money. Is it fair that your very much minority position could prevent me from selling my much larger stake? It's a house so chances are we can't sell it piecemeal (which is unlike stock of a company, but very similar to going private as a company!)
I've been through this a few times with stocks I've held, and rarely am I happy about the outcome. For example about 10 years ago I saw something that apparently no one else on wall street saw, so I purchased a number of shares in three competing companies in proportion to how well I saw them profiting over the next 5-10 years. It wasn't 6 months later that Warren Buffet announced he was buying the company I had bet on the heaviest.
Lets just say that I'm still sore about it 10 years later. I even checked the, "I want my stock converted to BRK/A" but they ignored it, because I was going to have too small a fraction of a single share of BRK (which would have been amusing by itself). Heck, in the 10 years since BRK/A has again doubled.
So, IMHO, its just another case of the market being rigged for the big investors.
We changed our company constitution for this exact reason. We felt that it was important that the majority owner could present an empowered, decision making face to the outside world, rather than having to start any discussion with"I'm here to talk, but I need to run anything past all the other owners".
This does impact on the rights of the minority owners - a 2% owner can't hold up or influence an acquisition for example - but the upside is that their shares are worth more than if the company was controlled by a squabbling rabble.
Having gone from a majority owner to a minority one, I still feel this was the right move for us.
1. You buy 51% of the shares (and voting rights), make an offer to buy the remaining 49% and call for a shareholder meeting to vote on the offer. You have the majority, vote yes, and acquire the company.
2. You acquire 90% of the shares. You don't even have to call for a shareholders vote; you can acquire the company immediately and squeeze out existing shareholders who are forced to sell and the offer price.
You can either acquire shares by submitting a tender offer (offering to buy shares at a specified price from shareholders) or tapping the public markets (and disclose it). If you think about this a bit more, you'll see there are ways to game the system by, for example, buying enough rights then making a low-ball offer but most of the loopholes are well covered by corporate law.
To address your complaint on fairness, yes, you can be forced to sell because if most of the shareholders want to take the company private, it would seem fair from the majority's standpoint to accept its rule. Not perfect but I don't think there exists a better mechanism.
Why not just allow the option to let the company go private but let these stockholders retain their minority holding? If you, like the PE firm, think the company is undervalued by at least 20-30% why can't you just retain ownership through the deal and receive your proportion of dividends?
http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=&SID=8edfd12967d...
You can't simply start accumulating shares silently on the public markets and then suddenly declare one day "I own 51% shares and now all your shares are worth 1 cent each muahahah!!!"
1. It's a statutory right, so it doesn't need to be and generally isn't covered in shareholder agreements: By law in Delaware (where Dell was incorporated) and probably most other U.S. jurisdictions, minority shareholders who don't vote for a buy-out, and don't otherwise consent to it, can't stop the buy-out from going through, but they have the right to demand a judicial appraisal of the "true" value of their shares. [0] [1]
2. Also, public companies normally don't even have shareholder agreements among all shareholders. The articles of incorporation and the bylaws are probably the closest approximation. In many jurisdictions, the board of directors can unilaterally change the bylaws without shareholder approval. (Shareholder approval is often required for changes to the articles of incorporation, though.)
[0] https://www.sec.gov/Archives/edgar/data/878280/0001193125082...
[1] http://www.jonesday.com/newsknowledge/publicationdetail.aspx...
(some sort of majority rule that is)
When you're forced to sell at whatever price, you lose any claim on the future price of the stock.
If a court can give you more money later, then you effectively weren't really forced to sell the stock. You retained some sort of "ghost ownership" with an entitlement attached.
Thus, effectively, the provisions of the shareholder agreement which have to do with this are disregarded.
That Dell was an insider probably complicates how to analyze this particular case.
This is absurd. If you don't wish to be outvoted in the sale of a public company, then don't buy shares in a public company. This is the deal you agreed to when you bought in. As a minority shareholder, you don't get veto power. You cannot unilaterally block a sale any more than you can unilaterally evict the board.
Nor should you be able to. As unfair as it may seem that someone else can force you to sell[1], it's just as unfair for you to be able to destroy other shareholders' value by blocking a sale.
[1] It's actually not true that you are forced to sale. Just as if you own part of a house and the other party wants to sell, you have the option to buy instead. You can pony up the cash to buy the house at market value, and your can do the same and buy the whole company. Can't afford that? Tough. You don't get to deprive other stockholders by torpedoing the same.