Dell returns to stock market with $34bn listing

After many months of preparation and a public faceoff with activist investors, Dell Technologies Inc. today officially debuted on the New York Stock Exchange.

The technology giant’s stock opened at $46 per share under the ticker symbol DELL, giving it a market capitalization of $16 billion, according to Reuters’ financial markets data firm Refinitiv. That’s rather a low figure given that Dell has forecast that it would post up to $92 billion in revenue in the fiscal year ending early next calendar year.

Other sources peg the market cap at a much heftier $34 billion given 754.9 million common shares outstanding, but it wasn’t immediately clear what shares account for the large number beyond the 206.5 fully diluted shares of Class C stock that Dell cited.

With $44.4 billion in net debt, according to TheStreet.com, the company has an enterprise value of just over $78 billion. TheStreet noted that includes Dell’s 80 percent stake in VMware Inc., worth $52 billion, plus smaller stakes in Pivotal Software Inc. and SecureWorks Inc.

J.P. Morgan Chase & Co. gave the stock a favorable “overweight” rating and a price target of $60 per share. The shares closed at $45.41 today.

The company’s return to public markets comes five years after it was taken private by founder Michael Dell (pictured) in a $24.4 billion deal. The transaction, which at that point ranked as largest leveraged buyout since the financial crisis, was overtaken by an even bigger move in 2016: Dell’s acquisition of EMC Corp. for $67 billion.

The company’s decision to become publicly traded again has everything to do with the EMC deal. Dell didn’t debut on the NYSE through a traditional initial public offering but rather via a complex financial maneuver involving subsidiary VMware, which it bought as part of the EMC acquisition.

Dell created a so-called tracking stock for VMware back in 2016 to attract outside investors and help finance the $67 billion acquisition. As part of its NYSE return, the company bought out the investors who owned the tracking stock in a $23.9 billion deal. Dell was forced to sweeten its offer significantlyin December to secure shareholder approval and overcome the pushback from a group of investors led by activist hedge fund manager Carl Icahn.

One reason the company went through this hassle is to avoid the extra investor scrutiny that comes with a traditional IPO. By taking a less conventional route, Dell has sidestepped some of the questions around the $50 billion-plus debt load that it had taken on to finance the EMC acquisition.

Now that it’s public again, the company should be in a better position to pay off the debt. Dell was already working toward that goal before its stock market return.

Today, Vellante added that as a public company with a majority ownership of VMware, Dell will be under constant pressure from investors that want it to spin out the virtualization company an independent company. “I don’t see that happening,” Vellante added. “Rather, I see Dell weathering the investor criticism and pressure on valuation.”

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