Law360, New York (November 13, 2015, 10:02 AM EST) -- The Delaware Court of Chancery is occasionally asked to determine the value of underwater common stock as part of an appraisal action or breach of fiduciary duty claim. The term "underwater common stock" refers to the situation where the value of a company in a sale is less than the company's debt obligation and the liquidation preference of their preferred stock. This situation occurs most often in venture capital-financed companies that have issued convertible preferred stock for the majority of their capital needs. The liquidation preference of the preferred stock is usually structured so that the preferred stockholders must be paid before the common stockholders receive any consideration in a sale or merger. But the way the Delaware Supreme Court and Court of Chancery have defined the board of directors' fiduciary duties to the common stockholders and described the definition of value has, in some circumstances, left room for underwater common stockholders to claim their shares have value....