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A roadshow of investors to promote Michael Dell's return to Wall Street has been postponed, in the final sign that some investors' resistance could threaten his preferred plan.
Investor meetings were due to start Monday but were postponed for a week while Dell and Silver Lake, the private equity firm that backed his recent deals, are pondering how best to proceed, said four familiar people.
Dell, which took its private PC company five years ago, unveiled a proposal earlier this year for a return on the stock market. The complex transaction would involve the exchange of shares in its private technology company for a special stock tracking class that was issued in 2016 to help pay for the purchase of the EMC storage company.
Some tracker shareholders have complained that the stock market's conditions underestimate their investment, which raises the question of whether Dell's backdoor return on Wall Street will be blocked in a shareholder vote scheduled for the next month.
Instead of the stock exchange, Dell will hold meetings next week with a number of Wall Street banks to consider a simple initial public offering for its stock, according to two people familiar with his thinking. However, Dell has not abandoned the idea of exchange, said these people.
An IPO would avoid an intense brawl on the stock exchange, but could involve a longer process and would still leave the stock tracking outstanding, a messy arrangement that the initial plan was designed to resolve.
The tracking actions, traded under the symbol DVMT, are theoretically related to the value of VMware, another company that Dell controls. They were issued to bridge the EMC financing gap, allowing Dell to pay for the acquisition without giving up control of VMware.
They have always been traded at a significantly lower price than publicly traded VMware shares. Dell's exchange offer – which involves a partial cash alternative, which itself depends on the value of Dell's stock – would leave a 28% discount on the DVMT stock, sparking hedge resistance funds and other arbitrage traders share.
Investors also questioned the valuation of Mr. Dell's private company as part of the transaction. This valuation, determined by the Company and Silver Lake, affects what DVMT shareholders receive for their shares.
Dell's exchange ideas were condemned this weekend by a DVMT holder as a "total bluff" designed to entice tracking stock owners to accept the company's terms. Dell has gone through a long process that has lasted several months and has considered alternatives such as an IPO, making it unlikely to reverse the situation at any given time, according to one person.
However, if Dell chooses to follow a simple IPO, this could eventually lead to a repurchase of the DVMT stock on an even worse basis, warned a person close to his plans. A dynamic stock market and a recent strong performance of the company could facilitate its IPO.
News of the late touring tour was first reported by The Wall Street Journal.
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