Delaware Court of Chancery Vice Chancellor Sam Glasscock III.

A Delaware Court of Chancery judge on Wednesday scaled back his valuation of AOL Inc. stock in another win for the company's attorneys, who had argued his initial finding of fair value at $48.70 has too high.

Vice Chancellor Sam Glasscock III, in a rare move, granted competing motions for reargument in the high-profile appraisal case after both sides questioned the treatment of financial inputs that led Glasscock to set fair value below the $50 per share price Verizon Communications Inc. paid to acquire the company.

Though AOL's Potter Anderson & Corroon attorneys initially said they did not plan to challenge the ruling, they later relented after a group of dissenting investors submitted an “implausible” valuation that ignored compelling market evidence to support AOL's position.

In court briefs, AOL argued that Glasscock had overvalued AOL's pending 10-year “display deal” to take over management and sales of display, mobile and video advertising that appears on Microsoft products, and pushed the judge instead to adopt an overall fair value of $45.54 at the time of the sale.

The appraisal petitioners, on the other hand, pushed Glasscock to adopt a higher value for the display deal and run the projected revenue through the discounted cash flow, or DCF, analysis that Glasscock used in his opinion.

Glasscock, however, said the petitioner's method would require him to revisit the assumptions underlying the DCF model and instead granted AOL's request to simply add the present value of the deal to the DCF analysis, reaching a final fair value of $47.08—$1.62 per share less than his original finding.

Attorneys for both sides did not immediately return calls Wednesday afternoon seeking comment.

The ruling came amid a turbulent time for petitioners looking to pursue their appraisal rights, after a pair of Delaware Supreme Court rulings signaled tighter scrutiny of the cases. In those rulings, known as Dell and DFC, the high court indicated a strong preference for using deal price as a strong indicator of fair value in an arm's length transaction.

Glasscock, however, determined that the AOL sale was not “Dell compliant” and conducted his own DCF analysis to reconcile wildly divergent valuations from petitioners and the company. He used the deal price only as a “check” on his calculations.

In his ruling, Glasscock noted that reargument echoed other judges' frustration with the use of DCF analyses, which often lead to wildly divergent valuations from competing sides in appraisal cases.

“No DCF analysis, used to calculate the 'exact' value of a corporation, can be sufficiently rigorous that it will not permit a good-faith argument that the value should be otherwise. This, I think, substantiates the wisdom of reliance on deal price, where appropriate; it also may explain the current popularity of motions for reargument,” he said.

“Nonetheless,” he added, “this is that rare case where reargument must be granted. ”

The petitioners are represented by Stuart M. Grant, Mary S. Thomas and Laina Herbert of Grant & Eisenhofer.

AOL is represented by William Savitt, Ryan A. McLeod, Andrew J.H. Cheung, Nicholas Walter and Courtney L. Shike of Wachtell, Lipton, Rosen & Katz and Kevin R. Shannon, Berton W. Ashman Jr. and Christopher N. Kelly of Potter Anderson & Corroon.

The case is captioned In re: Appraisal of AOL.