Dell Touts Possible IPO If VMware Stock Bid Fails

Dell Technologies is considering a return to public ownership after it confirmed that it has met with investment banks to discuss a possible initial public offering (IPO).

But this would only happen if Dell’s attempt to buy the tracking stock of its VMware unit is thwarted.

Dell has been considering an IPO for some time now. In February this year, Dell said it was considering a return to public ownership (i.e. an IPO) or a “combination” with VMware, which it acquired in the blockbuster takeover of EMC in 2016.

Dell IPO

Dell confirmed on Wednesday it had met with some investment banks to explore an initial public offering, reported Reuters.

The company’s board may not proceed with an IPO even if the VMware deal does not go through, Dell said in a regulatory filing.

Dell already owns 80 percent of VMware, and in July it announced it would buy the tracking stock in a $21.7 billion cash-and-stock deal, to return to the public market.

But Dell is apparently running into opposition in the form of a number of hedge funds, including Elliott Management Corp and Canyon Capital Advisors LLC, as well as activist investor Carl Icahn.

All of them have reportedly resisted Dell’s effort to buy back the “tracking stock” from them.

Icahn hostility

It should be remembered that Michael Dell and Carl Icahn have a bitter history, after Icahn fought vigorously against Michael Dell’s $24.4 billion (£15.6bn) buyout proposal to take Dell back into private hands in 2013.

Michael Dell was eventually victorious in the contentious battle to determine the future of the world’s third largest PC manufacturer. The idea to take Dell private again was to allow it to continue its transformation from a predominantly hardware-focused firm, to end-to-end solutions provider away from the constant glare of Wall Street and investors.

This is what makes a return to public ownership a surprise given the publicity that greeted Michael Dell’s takeover back in 2013. He has always claimed that operating as a private company would allow Dell to be flexible and take a long term strategy – something that would be difficult with the constant glare of shareholders.

On top of that, Michael Dell told Dell EMC in 2017 that being privately owned removes the potential issue of employees or customers being influenced by “activist shareholders” trying to influence the business strategy, which Dell highlighted as being a growing trend.

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