Dell Covering Bases, Considering Traditional IPO Instead of Tracking Stock

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Oct 3, 2018
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Dell (NYSE:DVMT) (Note: the ticker in question is a means to track Dell’s stake in VMWare Inc, as they do not currently have a ticker of their own representing their company as a whole) has been mulling over the idea of a traditional IPO approach and meeting with investment banks as “a potential contingency plan,” they confirmed Wednesday. Their previous plan of using VMWare Inc (NYSE:VMW) as a tracker and mutating those into Dell’s new stock may still remain in place, but could see some friction should the board vote down the option.

To be fair, their IPO methodology was definitely a bit unorthodox. Consumers would likely still be interested as would investors, however, the main problem is that the previously announced deal meant buying all of Dell’s VMware tracking stock for $21.7 billion, of which they currently own 80%. They would need all of their stock to move forward. Then, once that is done, they need to pass a vote on the board to actually go through with their current plan in it’s current design. Since that has some possible hiccups, having a backup seems pretty reasonable.

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This whole history of Dell’s back-and-forth may seem kind of baffling, due to Michael Dell vigorously pushing to go private back in 2013 for restructuring purposes. Before then they were having difficulty hitting revenue projections for nearly two years, and subsequently realized that being a public company put them under a microscope that revealed all of their flaws. If they had remained public at the time, a restructuring could have been seen as a distraction from their market-percieved issues. History is also repeating itself and as well as investor Carl Icahn, as he previously had issues with Dell going private back in 2013 and sees Dell’s valuation of $21.7 billion about $12 to $15 billion short of what he thinks it’s worth. While definitely a confusing history, there was always a method to the madness.

Luckily, if anything goes wrong in any of their plans, they declared in their SEC filing that they may just pull out of the IPO process entirely. They seem to have a backup plan in store for their backup plan, but when billions of dollars are at stake there ought to be as many backup plans as can be conceived. Michael Dell is planning something, and his board seems mostly with him in regard to his long-term plans for the company. There could be some holdouts, though, and if there are this could mean that Dell must take a different approach or just scrap it all together and try again later. While not ideal, this does allow for any previous ducks not in a row to line up for investors (again).

Deja vu should be kicking in right about now, as we have been here before. So has Dell, a little older and hopefully a little wiser.  Dell could be about to raise a significant amount of money after this all goes down, or this whole plan could just get shot down a break up on re-entry. Only time will tell on this, and as the process is getting closer to close, we will keep you posted on any developments!

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