Five years later, Dell Technologies returns to public market


Michael Dell is taking his massive technology company public again.

But this time, he’s making sure he maintains majority control over it.

Just five years after going private, Dell Technologies is diving back into the public waters, not through an initial public offering — the usual option, which also hands over substantial control to the open market — but through a unique avenue created by its 2016 purchase of data storage giant EMC Corp.

Dell Technologies on Monday said it was buying out shareholders of a tracking stock it formed through the EMC acquisition to create a new class of publicly traded common shares. The tracking stock, which trades under the tracker DVMT, has mirrored Dell’s 81 percent ownership in VMware, the cloud computing subsidiary it has controlled since taking over EMC.

The deal, worth $21.7 billion, means that Dell will once again be a public company through the common shares, and it will also simplify the stock structure of both Dell and VMware.

“We’re now simplifying our capital structure while adding new levels of strategic and financial flexibility, all with a long-term focus,” Chief Financial Officer Tom Sweet said in a statement provided to the American-Statesman on Monday.

But perhaps most important to Michael Dell — who has previously voiced disdain for an IPO — is that he will still have majority control over his company, at least to start out.

He will remain as CEO and chairman, with a 72 percent ownership stake. Silver Lake Partners, the equity firm that helped Dell go private in 2013, will maintain a 24 percent stake.

“Michael Dell is having his cake and is eating it, too,” said Patrick Moorhead, an Austin-based industry analyst. “He will have a public company and have clear majority ownership, so … this guarantees that there won’t be big changes to the company as long as Michael Dell’s name is on the stock.”

In 2013, after a treacherous battle with investors, Dell, along with Silver Lake, spent $24.4 billion to privatize the company. At the time, Dell was fighting hard to evolve its brand from just a PC-making company into one delving into more 21st-century technologies such as cloud computing. In an opinion piece published by The Wall Street Journal in 2014, Michael Dell said that becoming private had allowed his company to focus more on its strategy without having to answer to shareholders.

Not long after becoming private, Dell started taking big steps to achieve its goals. It acquired EMC in one of the largest tech buyouts ever, and it has worked since then to integrate EMC’s operations into its business. It has also focused on growing VMware, which has seen its stock price more than double in the past five years.

Still, Dell hasn’t been able to shake off the mountain of debt it took on mostly through the EMC purchase, and investors have been stuck not being able to trade on the open market, where the potential for greater returns exists. Despite revenue increases measuring in the billions since the EMC buyout, Dell still owes about $52.7 billion.

With Monday’s announcement, however, industry experts say Dell will be able to raise capital while also providing investors a way out if they desire, or to continue investing in the company through the new stock.

Under the deal, shareholders of the tracking stock have two options: either be bought out at a rate of $109 per share or be given 1.3665 shares of the new Dell Technologies common stock for each DVMT share owned. The new common stock shares will be traded on the New York Stock Exchange. If the deal is approved by DVMT shareholders, the only other public stock tied to Dell would be the regular shares in VMware.

A Dell spokesman said Monday that a ticker symbol for the new common stock would be announced later.

“It gives them another tool in their portfolio,” industry analyst Rob Enderle with Oregon-based Enderle Group said. “Michael wanted a method to be able to trade shares without the frustration of an IPO and being afraid of revenue and profits that most public companies have. On paper, it looks like he’s figured out a way to do that.”

Experts say it’s initially unclear what financial information Dell will have to publicly report through its new stock. Even before creating the stock, Dell had been reporting some of its financial figures because of the DVMT stock.

Dell has been tossing around possible strategic moves for months. Before Monday, the company, which is headquartered in Round Rock, had said it was weighing whether to conduct an IPO, complete a reverse merger with VMware or make a move with its DVMT stock.

In the end, Dell went with the move that lets its founder and chief executive keep a firm grip on the company while still maintaining a path to raising money.

In an interview on CNBC after the announcement, Michael Dell said the company went through a “fairly exhausted process” before making the decision to go public.

“(We) came to the conclusion along with two independent special committees that this was the best option,” he said, adding that the company’s merger with EMC contributed to the decision. “We’ve captured the hearts and minds of the decision makers in this age of 5G and (internet of things) and AI, and we’re winning. So it’s a great time to do this.”



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