Five Years After Going Private, Dell Is Going Public Again

Jul 2, 2018

Round Rock-based Dell Technologies is going public again after operating for five years as a private company. The $21.7 billion deal, announced Monday, was approved by the boards of Dell and VMware on Sunday night. VMware is the networking software company Dell acquired when it bought EMC.

Dell, with help from the investment firm Silver Lake, went private in 2013. The company said the move gave it the freedom to dramatically expand its technology offerings. Now, founder and majority shareholder Michael Dell says it has achieved much of what it set out to do and is prepared to go public again.

John Doggett, a senior lecturer at UT Austin's McCombs School of Business, says the move isn't surpring. 

"Because of the new tax law, Dell was looking at a lot of interest that they weren't going to be able to deduct from their income taxes because they simply didn't have enough revenue," he says. "Secondly, there's a big issue of how much they were going to have to pay in taxes on money that's parked overseas. And so everybody has been expecting Dell to go public." 

The agreement would mean that Dell would buy the DVMT tracking stock. These are the shares that track Dell's interest in the software firm VMware. Dell created the stock when it acquired VMware, which was already publicly traded. 

Each share of its Class V tracking stock would be converted into about 1.37 shares of Class C common stock. At last close, DVMT was $84.58 per share. Today's offering is a 13 percent increase for current shareholders, putting the value at $109 a share. Dell's Class C common stock will be listed on the New York Stock Exchange.

Separately, VMware’s board of directors voted to declare an $11 billion cash dividend to shareholders connected to the deal. Dell’s share of that dividend would be roughly $9 billion. 

"When a company is publicly traded, it gives the company the ability to offer its existing employees and its new hires stock options," Doggett says. "The question to ask is ... will they return to their old model of making stock options grants for everyone that works for the company or just senior people? My hope is that, yes, they will make it available to everybody who works for the company because that then will make them competitive." 

Dell has over 100,000 employees; roughly 14,000 work at the headquarters in Round Rock. Michael Dell will hold onto his role as chairman and CEO, while the firm Silver Lake will keep its minority stake.

The transaction still needs shareholder approval, which Doggett says is likely to happen.