The treatment of stock-based compensation as a cash expense when determining fair value has become a point of debate in appraisal litigation. Most investment firms recognize the expense when determining fair value of a company’s shares. The Delaware Court of Chancery, however, excluded stock compensation as an expense when determining fair value in Merion Capital, L.P. v. 3M Cogent, Inc., No. 6247-VCP, 2013 WL 3793896 (Del. Ch. July 8, 2013). In a blog essay written for the Delaware Journal of Corporate Law, DJCL articles editor John Gentile examines the diverging viewpoints of the financial industry and the Court of Chancery, and concludes that to achieve the most appropriate estimate of fair value, the Court of Chancery should count for stock based compensation as a cash expense.

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