What happened
Shares of tracking stock Dell Technologies (NYSE: DVMT) surged on Monday after Dell announced a plan that would see the tech company return to the public markets. Dell will buy out its tracking stock, which is tied to the value of VMware (VMW), with either cash or Dell Technologies Class C common stock. The Class C stock will be publicly listed on the New York Stock Exchange when the deal concludes.
The tracking stock was up about 7.5% at 12:30 p.m. EDT, after being up as much as 12% earlier in the day. Shares of VMware were up about 10%.
Image source: Getty Images.
So what
Dell plans to buy out the DVMT tracking stock in a deal valued at $21.7 billion. These shares were originally created as part of Dell's acquisition of EMC Corp. in 2016. About 80% of VMware is controlled by Dell and holders of the tracking stock.
DVMT shareholders will be able to trade each share for either $109 in cash or shares of the Class C stock. The deal involves VMware paying an $11 billion special cash dividend to DVMT shareholders, with Dell using cash or Class C stock for the remainder.
This transaction will make Dell's complicated corporate structure a bit simpler without piling on even more debt. The company had $52.7 billion in debt at the end of the latest quarter, according to Bloomberg.
Now what
Dell has been considering strategic options since the beginning of the year, with possibilities including a reverse merger where Dell sells itself to VMware and a straight initial public offering. The company has instead opted for a simpler approach that will still see its stock publicly traded.
The deal is expected to close in the fourth quarter of this year.
