What does VMware’s plummeting tracking stock value mean for the Dell-EMC deal?
Last October, technology giant Dell announced it would buy the multinational data storage company EMC in a monumental merger deal worth $67 billion. In the months preceding the deal, EMC stock was up to around $28.35 due to shareholder anticipation. Since this time, however, shares are down.
A major element of this mind-blowing deal, The Register's Chris Mellor wrote, centered around EMC shareholders receiving $24.05 cash, along with access to VMware tracking stock, which was then valued at $9.10 but has seen plummeted to a value of near zero. Before the deal, VMware's shares were valued at $82.09, but have since fallen by a 40 percent to $49.20.
Since this market change, EMC's gain is now valued at $47.2 billion. This means that Dell's investors must raise around $40 billion to effectively fund this Dell-EMC merger, John Shinal at USA Today explained. Industry experts claim that Dell could also forgo the tracking stock portion of the merger, leaving the deal valued at around $50 billion, yet this outcome is less than certain.
"If that debt-raising exercise fails, because investment groups and organisations can't see EMC shareholders accepting the tracking stock, and can't also see why they should finance Dell/Silverlake buying EMC for 30 per cent more than it's worth, then the whole deal could fall apart," Mellow reported.
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