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Here's What Happens With VMware and Dell Today – Motley Fool

What happened

Dell technology completed his trip back to the public market last Friday by getting everything in circulation Dell technology Class V (NYSE: DVMT) stock. Transactions are also involved VMware (NYSE: VMW), which is controlled by Dell with around 80% of the shares. VMware paid a one-time dividend of $ 11 billion to shareholders on Friday as part of the agreement, with most of the payments given to Dell.

Dell shares rose around 3.4% at 1:30 a.m. EST, while Class V shares are no longer traded. VMware shares fell 14.3% from Friday's close, reflecting special dividend payments. Today is an ex-dividend date. Adjusted for special dividends, VMware's stock rose by around 3%.

Dell Workstation.

Image source: Dell.


Dell Class V stock is a tracking stock that is intended to track the performance of Dell shares in VMware. The shares were initially issued as part of Dell's agreement to acquire EMC, which was closed in 2016. EMC had 81% of VMware before it was acquired by Dell.

Dell managed to exchange a mix of new cash and Class C shares for all Class V shares outstanding on Friday. The company paid $ 14 billion in cash and issued nearly 150 million Class C shares to retire from stock tracking. This step greatly simplifies Dell's corporate structure, and that brings Dell back to the public market without the need for a public offering.

Class V shareholders have the option to receive cash of $ 120 or Class C shares of 1.8066 for each Class V share, up to an aggregate cash limit of $ 14 billion. More than 90% of shareholders choose cash options, and the rest choose stock options. Because the cash limit is exceeded, cash-choosing shareholders will receive a portion of their payment in Class C shares. Cash options are a smart move, with stocks of Class C shares currently trading around $ 47 per share.

As part of the transaction, VMware pays a one-time special dividend of $ 11 billion. Dividends are paid to shareholders recorded at the close of business on December 27, with the payment date of December 28. December 31 is an ex-dividend date. Payment of $ 11 billion succeeded in $ 26.81 per share.

"Dell Technologies was created to be an important infrastructure company for this digital era, and with today's announcement, we align the interests of our stakeholders to benefit from integrated innovation and value creation from all of our business families," Dell CEO Michael Dell said in a broadcast the press announced the completion of the transaction.

Now what

With stock tracking gone and Dell returning on the public market, investors can now bet on the company as a whole, not only on its shares in VMware. Dell's revenue has grown rapidly, with 15% year-on-year growth in the fiscal third quarter. But the company is still burdened with a large amount of debt. On November 29, Dell had about $ 48.7 billion in debt and $ 17.5 billion in cash. Dividends received from VMware will pay a portion of the cash from the purchase of tracking shares.

VMware now has a little less cash after paying a one-time dividend. Total cash on November 29 was $ 13.5 billion, along with around $ 4 billion in debt. This agreement will make VMware's balance sheet much weaker.

After becoming a private company in 2013 and creating a complex stock structure several years later to finance the EMC agreement, Dell has canceled these steps and once again become a public company. How everything works today remains to be seen.

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