In a May 29, 2023 opinion by the Delaware Chancery Court addressing a claim by sellers for specific performance under a merger agreement following buyer’s termination for breach of the capitalization representation, the court found that sellers breached the capitalization representation under the merger agreement based on the post-signing discovery that a former employee held phantom equity in a subsidiary of the target company.  Despite buyer’s concession that the financial value of the former employee’s interest in the subsidiary was “minor relative to the deal value,”[1]  the court concluded that buyer was entitled to terminate the merger agreement since the capitalization representation was brought down flat at closing (and not subject to any de minimis or materiality qualifier).