It is not uncommon these days to see an activist stockholder—whether an individual or entity (such as a hedge fund)—acquire a meaningful, but far from controlling, stock position in a corporation, and then seek to use that equity stake to exert pressure on the corporation to advocate for change. The Delaware Court of Chancery recently issued an opinion addressing a corporation’s ability to remove such an activist stockholder through the acquisition of the activist stockholder’s stock.
On April 28, Vice Chancellor Donald F. Parsons Jr. issued an opinion in Ryan v. Gursahaney, C.A. No. 9992-VCP (Del. Ch. 2015), dismissing claims challenging, among other things, a corporation’s repurchase of its stock from an alleged activist stockholder that owned 5 percent of the corporation’s common stock.
