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 (NYSE: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%.
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.
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.