Today's stock market
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Technology stocks led the market today, with the Technology Select Sector SPDR ETF (NYSEMKT:XLK) moving up 0.9%. Energy shares were laggards; the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEMKT:XOP) lost 1.9%.
As for individual stocks, Dell Technologies (NYSE:DVMT) is going from partially public to fully public by selling shares that track VMware (NYSE:VMW), and Tesla (NASDAQ:TSLA) announced production numbers that hit an important target.
Dell is going public again
Dell Technologies announced it is returning to the public market in a complex transaction by buying back Class V shares, which track its ownership of VMware, using a combination of cash and a newly issued share class, which will subsequently be traded publicly. The tracking shares, which trade under the symbol DVMT, rose 9% to $92.20 on the news, and VMware stock jumped 10.2%.
Founder Michael Dell took the company private in 2013, but when Dell acquired EMC Corporation in 2016, Dell financed part of the deal by issuing publicly traded shares that track the part of VMWare that EMC had owned and had then become part of Dell. The Class V shares track the economic performance of 61% of Dell's interest in VMWare, which in turn amounts to 81% of that company.
Dell is offering holders of DVMT a choice of $109 in cash, subject to a maximum cash amount of $9 billion, or 1.3665 Class C common shares, which represent an economic interest in the total Dell Technologies company. Following the close, owners of the Class V shares will own 20.8% to 31% of Dell Technologies, depending on how many shareholders choose the cash option. As part of the agreement, VMWare has agreed to pay a one-time, special dividend of $11 billion to its shareholders. Dell will use its share of the dividend to finance the cash pay-out to Class V shareholders.
VMWare shareholders will get the benefit of reduced uncertainty and the payout of the special dividend, which amounts to over 16% of today's share price, while Dell will go public without the expense of an IPO. The fact that the tracking shares are selling below the implied value of $109 probably reflects investor uncertainty about the eventual pricing of the Class C shares once they start trading publicly.
Tesla hits Model 3 production goal
Tesla announced second-quarter production numbers, saying that it achieved CEO Elon Musk's promise of building 5,000 Model 3 units per week. Shares initially soared over 6% on the news, but ultimately closed the day down 2.3%.
Total Q2 production amounted to 53,339 vehicles, a 55% increase compared with the previous quarter. Tesla produced 28,578 Model 3 cars during the quarter, the first time that Model 3 production was greater than that of Model S and Model X combined. The Model 3 production rate more than doubled during the period, and Tesla expects that it will be able to make 6,000 of the vehicles per week by late next month.
Tesla also reaffirmed its previous guidance for positive GAAP net income and cash flow in Q3 and Q4, saying that both orders and deliveries of Model S and Model X were above levels in the year-ago period. The reservation count of Model 3 units stood at about 420,000 compared with 450,000 at the end of last quarter, with 28,386 vehicles delivered to date.
Tesla managed to hit its production goal just under the wire, though. Model 3 vehicles in transit to customers ballooned from 2,040 at the end of last quarter to 11,166 this weekend.