Appraisal rights entitle shareholders to seek “fair value” for their shares after a merger or acquisition. The outcome is determined through a judicial proceeding or an independent valuation. The rights serve as protection to the shareholder from receiving a price for their shares that they believe is less than fair value. If shareholders believe that the acquirer is not paying a fair value, they have the ability to exercise their appraisal rights.
For IBKR clients looking to exercise their appraisal rights, the processing steps are:
1. Shares Must be Settled
Shares must be settled and held at DTC in order to exercise appraisal rights. Settlement must occur at least five (5) business days prior to the deadline for appraisal rights with the agent.
If the shares are not settled by this time, the request will be handled at our discretion and IBKR cannot guarantee that it will be processed. In addition, it is possible that only a portion of the shares requested may be exercised in this instance.
2. Submit a Ticket
Clients are required to create a web ticket instructing IBKR to submit the appraisal rights exercise request to the Depository Trust Company (DTC).
The ticket must be submitted to IBKR no later than five (5) business days prior to the deadline for appraisal rights with the agent. Requests submitted within five (5) business days of the deadline will be handled at our discretion and IBKR cannot guarantee that the request will be processed. It is also possible that only a portion of the shares requested may be exercised.
The ticket must include the CUSIP/ISIN, share quantity, and an agreement to pay the $500 processing fee.
3. IBKR Contacts DTC
IBKR will submit your exercise request to DTC. If approved, DTC will sign the “Appraisal Rights or Dissenters’ Rights Instruction Letter” confirming the exercise request. The agent is notified of the shareholder’s request to exercise their appraisal rights by DTC. These steps have no set timeframe for completion and will vary per request.
4. DRS Receipt is Issued to IBKR
If the agent accepts the exercise of the appraisal rights, DTC will then generate a Direct Registration System (DRS) receipt. The receipt will act as a physical certificate for the quantity of shares that rights are being exercised for. DTC will provide the receipt to IBKR.
5. Electronic Position is Removed
Once IBKR receives the receipt, the quantity of shares supporting the exercise request will be removed from the account because the shares are now represented in physical form.
6. IBKR Mails DRS Receipt to Client
The DRS receipt will be delivered to the mailing address of the account that is holding the long position. No other address can be used.
After the DRS receipt is delivered to the address on the account, IBKR has no further involvement. IBKR’s obligation to submit the exercise request has been fulfilled and it is then the responsibility of the client and their legal counsel to proceed.
Any request to cancel the exercise request will be accommodated at our discretion and will take additional processing time. For updates throughout the process, shareholders can monitor the Message Center.