Dell shareholders back return to the public market
We're taking a look at sales returned to the public markets in two thousand thirteen the computer company quit the NASDAQ in a controversial twenty four billion dollar buyout. But now five years later and after a fierce fight among some key shareholders. Michael Dell's technology company is set to listen to the new York Stock Exchange are US editor of the lex column. Sajida in that talks to Amy keen about what's bringing the company back to the public market. And why some shareholders resisted the deal? So G starts with what prompted Michael Dell to take his company private just a few years ago. So dull, obviously, it was the famous stop. He c- maker Michael Dell started the company in the eighties. When he was a college student and his dorm room at Texas. It was hot company for a really long time. But say ten years ago, you know, the PC became much less important smartphones were here, the the iphone and the like, and so he ended up spending like fifteen billion dollars between twenty ten and twenty twelve trying to turn delicacy off company, a much broader tech company, the market hated that. It's down shares like twenty five percent between twenty ten and twenty twelve and around the same time he had met this guy. Egon Durban who was a private equity investor to firm called Silverlake, which is a Silicon Valley based buy out firm, which is quite prominent both in Silicon Valley and in Wall Street and doing these buyouts, and they happen to be neighbors in a Wii. And so they had the idea that they could take Dell private buy out the public shareholders, and then reinvent this company and private so through the course of twenty thirteen the announced the deal and. By the end twenty thirteen they were able to tail private at a twenty four billion dollar valuation is very controversial a bunch of shareholders protested because they thought Michael Dell was a CEO, and he knew things that no one else did. And if he's buying why should we selling? But ultimately, they're all able to push the deal through and Dell became a private company in late. Twentieth. Thirteen and so if you fast forward five years Dell is going to be coming back to the public markets. What's changed? What happened over this period? Yeah. So the whole plan was to turn around and reinvent the company, which they did very dramatically Silverlake is a private equity firm. And so they have investors who are pension funds, and sovereign wealth funds and endowments who after five seven ten years want their money back. So it's natural for companies that go private like delta to relist again. And so what they've done in the last five years is that they really did till it turn del into this like one stop shop for corporate IT department. So they bought most prominently EMC, which is a tech data vendor for sixty seven billion dollars. They offload. A divisions that didn't fit anymore, and they've turned into this company that really can go up against Cisco HP and IBM and companies like that Sajid in order for Dow to have the backing to list again this time in the new York Stock Exchange, they company needed shareholder support. Can you walk us through what led to the vote that took place on Tuesday places start with that as we have to go back to the EMC deal, which happened 2016 EMC was a sixty seven billion dollar company. Dell was big it was perhaps thirty forty billion. Maybe at the time twenty five something like that. So it was private. So we don't actually know what the valuation was. But the point is he was much bigger. And so two by all of EMC offered their shareholders to things that gave them twenty three dollars per share in cash and the gave them a piece of paper called tracking stock to track. Another company called VM ware VM where was majority owned by EMC was also listed. So eighty percent of this company that was listed was owned by EMC Dell couldn't afford to buy all that for cash. And so they said, you know, what will give you this piece? The paper called tracking stock in VM ware, and it will reflect our interest in this company VM ware, and it should trade roughly in line with with VM ware. And so this piece of tracking stock which was publicly listed or traded called deviant t was created UNC shareholders got it. And for the last two years. It has traded has gone up quite a bit. The problem is it's always triggered a sharp discount to the pure VM ware stock big del wanted to go public again. And so the way to do that was not a traditional IPO where they just go out and sell shares of Delon people by that in like an under written offering what they wanted to do was take Dell shares a private and then swap it with Devi shareholders who would get the new Dell paper and through that transaction. Dell would again be public company. The problem was how do you actually value DVD, and that has been the fight for the last six months, let's say it's been particularly contentious who are some of the key sort of people fighting. It's interesting TV. Mt. Is like this weird security. VM ware is hard to understand. So not survey. Rising Lee its biggest investors have been hedge fund. So most prominently call icon had a big stake Elliott, the very high profile hedge fund that gets in these kind of fights. Was there a bunch of other kind of brand name twins were involved in the Soza a fight really between for the last six months to throughout the terms of this reverse merger IPO between these big hedge funds, and then Silverlake sedans had the benefit over these last few years of not having to answer to the public markets not having to release quarterly earnings. How's it looking like, it's gonna trait? That's a great question. So part of the fight that's gone on with this VM ware. Tracking stock called Devi MTA has been there's really two issues around it one VM ware. Let's say one hundred and fifty dollars per share company. The tracking stock has traded say around one hundred or one hundred and five so thirty forty percent discount. So the whole of that tracking stock one want to be made whole sort of get a value that approaches at one fifty the other half of the fight in the more complicated. Fight is a big portion of this. Deal is in this del stock which is suddenly going to be public. How much is that worth since it's private there's a big disagreement on how much that is worth. The delta worth quite a bit. The hedge funds have been skeptical. And so that was really the core kind of fight that just got resolved a came up with a clever mechanism to sort that out. But if you look at the actual numbers, and where Dell's going to trade at least initially the Cordell business businesses, not going to trade at a very high multiple. And so Michael Dell who was frustrated five years ago about his valuation is probably going to be frustrated now again, and so the question is do shareholders publisher holders now mutual funds, and the like do they kind of Dopp his vision on how Dell is going to really compete in this new IT market that they've been remade. And they're right up there with Cisco, and Microsoft, and the others or is this going to be thought of as a slow growth business that has this corporate governance problem with private equity firm who still there and Michael Dell who have super voting shares? We're going to take advantage of us. So the real question is now. Hey, the public. They got this deal done our daily at the benefit of the doubt or not. All All right. right. Thank Thank you. you.