NEW YORK (CNN/Money) -
Remember those "hanging chads" that caused so much trouble in the 2000 U.S. presidential election? Tuesday's shareholder vote on Hewlett-Packard's proposed buyout of Compaq could cause a similar hullabaloo.
Each side in the battle over the $22 billion deal has claimed substantial shareholder support. But as the deadline for voting neared, the outcome was still too close to call.
At last count, institutional investors controlling roughly 21 percent of HP's voting shares had said they planned to vote against the deal. Meanwhile, institutional shareholders controlling a little more than 8 percent of the stock had said they would vote in favor.
Institutional Shareholders Services, a key advisor to big investors, also has come down in favor of the deal, but it remains unclear exactly how influential that endorsement will be, considering the high-profile nature of this deal and the fact that those institutions that already have nixed it are ISS clients.
According to HP, institutional investors hold roughly 57 percent of HP's stock. Retail, or individual, investors hold about 25 percent. Management and insiders hold less than 1 percent.
In the months since dissident HP director Walter Hewlett launched his fight to block the deal, all of HP's shareholders have received voting cards, called proxies, from each side. Individual investors have received numerous cards. HP sent out white ones. Hewlett's were green.
Shareholders can fill out and mail in as many cards as they want, but only the last one counts. And counting is what it all comes down to Tuesday.
Enter IVS Associates, the firm whose task it is to collect the proxies received by each side and determine the final outcome of the vote.
"It's our job to determine that only the latest-dated, valid proxies get counted," said Creig Dunlop, an IVS assistant vice president who will take part in the counting.
HP will hold a shareholder meeting near its headquarters in Cupertino, Calif., Tuesday at which some investors are expected to cast their final votes. Once those votes are in, IVS will collect all the proxies from both sides and bring them back to its offices in Newark, Del., to begin the final count.
There, they will organize the cards and manually inspect them to determine the validity of each one. Depending on the number of proxies, that process could take as little as a day or as long as several weeks.
IVS then informs the parties in the proxy fight of the outcome of the preliminary count.
"If they feel they have a declarative victor or perhaps don't have enough votes one way or another, sometimes they will make announcements after the meeting," Dunlop said. "But there's no guarantee about that, and it's entirely up to them."
When the vote is close -- a strong possibility in this case -- IVS gives the parties an opportunity to review and challenge the tally, allowing them to scrutinize the validity of each individual proxy by checking things like signatures and dates.
Once IVS has ruled on all of the challenges, it then certifies the vote. But it doesn't necessarily end there.
"After we've ruled on challenges and certified, if they did choose to, they could have it litigated," Dunlop said.
In the months since Hewlett, the son of one of HP's co-founders, launched his proxy fight against the proposed deal, the rhetoric from each side has intensified and become increasingly personal.
While the substance of his arguments stems from concerns that the deal would increase HP's exposure to the flagging PC industry and low-end server business while jeopardizing its strong position in the printing and imaging business, Hewlett also has specifically targeted HP CEO Carly Fiorina, suggesting that she is incapable of managing such a large business.
HP has attempted to discredit Hewlett, characterizing him as a "musician and academic" whose arguments should not be taken seriously. The company contends that a merger is necessary in order for them to become stronger players in an increasingly competitive industry and would yield annual cost savings of $2.5 billion and about a 12 percent improvement in earnings.
The outcome of the vote is crucial for HP (HWP: Research, Estimates), and many company watchers have characterized it as a referendum for Fiorina and the current senior management team. The company has not offered a longer-term outlook for an independent future.
For its part, Compaq (CPQ: down $0.49 to $10.21, Research, Estimates), which has scheduled a shareholder meeting for Wednesday during which it will collect the final proxies for its part of the proposed deal, has asserted its ability to press on in either case.
It generally is expected that most Compaq shareholders will vote in favor of the deal.