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Shareholders clear decks for Dell to return to public markets

By securing shareholders’ approval for the buyout of Dell’s (DVMT) tracking shares, CEO Michael Dell Tuesday cleared probably the final hurdle for taking his namesake company public without an initial public offering. The latest development has put an end to long-running negotiations and eased the uncertainties surrounding the management’s decision to have the company’s stock listed in the stock market after a gap of five years.

If everything goes as planned, Dell will start trading on the New York Stock Exchange by month-end under the symbol DELL. Earlier, the efforts to go public without an IPO had suffered a setback when a section of shareholders led by activist investor Carl Icahn objected to the idea. At one point, Michael Dell was forced to weigh other options, including IPO, to return to the stock market. Icahn, who maintains a hostile relationship with Dell’s management, had adopted a negative stance when the company was taken private in 2013.

The efforts to take Dell public without an IPO had suffered a setback when investors led by Carl Icahn objected to the idea

The shareholder approval allows the tech giant to buy the tracking shares, which act as a proxy for Dell’s stake in its fully-owned subsidiary VMWare, in a cash plus equity deal under a unique listing procedure. The total value of the outstanding stock is estimated at $24 billion. After listing, most probably on December 28, Dell’s class-C stock is expected to trade at $48 per share – as per the current valuation of the tracking stock.

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It is expected that Michael Dell and his partner Silver Lake will own up to 81% stake in the company. The new stock will be issued to holders of the tracking shares based on the value determined during the pricing period.

The advantages of being a listed entity will allow the management to pursue its growth strategy more effectively, which has already transformed Dell into the biggest privately held technology company in just a few years. Though Dell’s strong financial performance continues to enhance cash flow, its high debt continues to be an area that needs attention.

 

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