Shares of VMware (NYSE:VMW) jumped on Friday following reports that privately owned Dell was considering an initial public offering to raise cash and pay down debt. Dell was taken private in 2013 and acquired EMC Corp. in 2016, a deal that came with a majority stake in VMware. VMware stock closed up 9%, while shares of Dell Technologies (NYSE:DVMT), which tracks Dell's interest in VMware, dropped about 6.5%.
Dell took on a tremendous amount of debt to go private in a leveraged buyout and to acquire EMC. Bloomberg puts the total debt load at $46 billion. The Dell board of directors will reportedly discuss strategic options at a meeting later this month, including a possible IPO.
Another possibility is for Dell to acquire the portion of VMware that it doesn't already own. Dell is also reportedly considering a public offering for its Pivotal Software cloud-computing business.
Shares of VMware have now rocketed 165% higher since the beginning of 2016, thanks to a string of solid results and a buoyant stock market.
Neither Dell nor VMware has confirmed anything, so this is all still in the realm of speculation. If Dell does try to go public this year, it would join some other big-name private tech companies, including Dropbox and Spotify, that are also expected go public soon.
VMware is expected to report its fourth-quarter results on March 1.