Dell Is Considering A New Deal That Could Result In One Of The Largest IPOs Of All Time

Must Read

Are You A Gaming Geek: ‘Five Commandments’ Before You Buy Video Games Online !

Does your day start with joysticks instead of coffee mugs? Or as a kid your best friends were the...

The Growth of OTT: Blip in the Radar Or a Real Threat to Traditional TV?

People are attached to their smartphones way more than they're to any other gadget. In fact, the average person...

Top Softwares for Business in 2021 That Every Startup Entrepreneur Must Use

In the conditions of the global pandemic and economic crisis, small and medium-sized businesses face different problems and do...

In an interesting new turn of events, Dell Technologies may be considering a massive IPO to become a publicly traded company once again according to some reports. If this were to happen, Dell IPO may very well be one of the biggest IPOs in history.

To understand Dell’s current situation and plans, it is important to be well versed in their recent dealings and history. In late 2013, Dell CEO Michael Dell and equity firm Silver Lake took the company private in a massive and controversial deal worth $25 billion. This was followed by the acquisition of EMC Corporation for a world record (at the time) fee of $67 billion in late 2016. However, funding these gargantuan deals was no easy feat, and left Dell with $57 billion in debt as of September 2016.

Meanwhile, the stagnating growth and decline in the PC market, Dell’s core business, meant that debt repayment laboured on at a snail’s pace. This mountain of debt made the top hierarchy at the company to float Dell IPO (Initial Public Offering) at the beginning of 2018, and raise capital for investment and debt repayment. Dell’s massive debt burden, however, meant that investors would reluctant to get involved. This consequently meant that any such deal was dead in the water, at least for the time being.

Advertisements

Nevertheless, reports over the past few days seem to suggest a potential Dell IPO could once again be on the cards.

So what has changed since the start of the year to prompt this reassessment?

One primary factor is Dell’s recent upturn in fortunes. In Q2 of Fiscal Year 2019, Dell’s operational cash flow grew by 45% YoY to $2.6 billion. Their total debt also came down from $57.3 billion to $50.3 billion. This prompted Dell to table a $21.7 billion cash plus stock offer to several hedge funds in order to buy backtracking stock tied to Dell’s 81% stake in virtualization software provider VMware Inc.

Tracking stock is a specific share that only pertains to a singular unit of the company rather than the entirety of the business. This would have allowed the company to have publicly traded stock without conducting an actual IPO. However, a deal has failed to materialize once again, purportedly due to the hedge funds’ claims that Dell’s current offer undervalues the tracking stock, and overvalues the company.

Without getting the hedge funds on board, Dell now has one last option remaining if they are adamant about buying back their tracking stock – an IPO. If Dell were to go public via the IPO route, then shareholders of the tracking stock would be obligated to sell to Dell, albeit at a premium of 10-20%. As to what would be the better deal for both Dell and current shareholders, it would be heavily dependent on the performance of the IPO itself. As it stands, Dell and the shareholders are in a standoff, and it remains to be seen who blinks first.

Advertisements

This is a defining period in Dell’s life-cycle as an organization. The company is gradually branching out from its traditional PC manufacturing roots into other information technology products and services including storage, servers, networking and cybersecurity. The outcome of this deal will surely decide whether Dell will remain relevant in the upcoming decade, or slowly fade away into relative obscurity.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Latest News

Book Uber Cabs Via WhatsApp Now: Service In More Cities Soon

After grocery and payments, it's time for Uber cabs on Whatsapp! The digital era has brought us endless advantages...

In-Depth: Dprime

Will ‘TikTok By Microsoft’ Be A Winner?

For the last two years, TikTok has been in the public eye for all sorts of reasons. First, it was the exploded and unparalleled...

Facebook Subscription Model: Looking Beyond Ad Dollars?

Seldom do job listings create a stir this gripping. However, when the job listing in question is a stealth post from Twitter, with a...

Will The Online Food Delivery Market in India End Up Becoming A Two-Horse Race?

It's pretty much evident that the food delivery space in India is all set to get riled up soon enough as one of the...

More Articles Like This