2016 | 2017 | ||||||
Price: | 52.19 | EPS | 4.5 | 4.9 | |||
Shares Out. (in M): | 428 | P/E | 18 | 16 | |||
Market Cap (in $M): | 34,131 | P/FCF | 12.5 | 10.1 | |||
Net Debt (in $M): | 1,500 | EBIT | 1,200 | 1,500 | |||
TEV (in $M): | 8,254 | TEV/EBIT | 23 | 18 |
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Note the financials are for VMW since that is what matters as DVMT is just a tracker.
Here is the quick exec summary for those who are too busy with Turkey-comas and College Football.
What: DVMT is a tracking stock for VMW - it currently trades at a 35% discount to what it tracks
Why: DVMT is an unsecured creditor of Dell (Dell is levered, certain rights are stripped, etc.)
Return: Overtime two things will happen: first, DVMT will collapse the discount from its current level to some lower level (for my analysis I assume it shrinks to 20% but I can make a cogent argument of why it should be even less) and second VMW itself will appreciate as the market realizes it has a future. Right now you can purchase DVMT for something like 6x 2018 FCF. This should combine for an overall return of something like 50% over the next 12 months. This could be a near double if the discount collapses to zero (which is possible).
Some sardines are made for trading, others are made for eating, DVMT is an eating sardine.
Buggs1815 did a good job of writing DVMT before it was issued in September of this year. I hope to expand on this write up by focusing more on how VMW itself will juice the returns.
VMW:
The bear case against VMW was simply this: cloud, cloud, cloud, cloud. VMW made their mint virtualizing machines within private clouds to allow enterprises to stretch resources (i.e. save money). This has slowly changed as public clouds like AWS and Azure have taken off as compute has moved from private to public cloud. Many thought this was the death blow for vmw what they failed to realize was the there is a long fat tail in the transition to the public cloud and some customers may never fully move there (think financials and healthcare). Further VMW has not been sitting idle and has been innovating on ways to further extend their useful lives. This is best exemplified with the IBM and AWS partnerships. The AWS partnership is far more important than the IBM partnership (spoiler alert AWS has a brighter future than IBM). The AWS partnership allows companies to utilize the elastic compute capabilities of AWS while remaining safe within the VMW vSphere set up. In simple terms this basically means that VMW acts as a critical stepping stone for companies who want to partially transition or just take advantage of public cloud resources while not giving up the comfort blanket of the VMW private cloud. AWS is going into beta testing in Q1, there is a chance they talk about it at reInvent (AWS conference in Vegas next week). Further it will go live in 2H'17. I have spoken with a couple channel partners on this and they are very eager since it helps open up a new class of customers and more cross selling opportunities.
VMW has four key products worth talking about (some others but realistically they are just noise):
1) vSphere - this is VMW's main virtualization product that allows you to run multiple virtual machines on a single piece of hardware
2) End user computing - this is their mobility management product (basically the bones of the AirWatch acquisition with some desktop virtualization sprinkled on top)
3) NSX - this is VMW's sexy new product, it is a network virtualization product. Many customers are using it for micro-segmentation and it allows networking hardware to become more efficient (think of vSphere but for firewalls, switches, and routers).
4) vSAN - This is their new virtualized storage product (integrated into vSphere kernel which pools disk space) - this product competes with NTNX
Product category #1 is in a long-term secular decline. It was originally predicted to decline at a rapid rate but many are now realizing it will be a slow bleed (has slowed from -30%+ declines to now a low single digit decline). Product #2 will never amount to much and I wish they would stop devoting resources to it (luckily its not a huge resource sink). Product categories #3 and #4 are fast growers. The biggest issue VMW has is all products tend to be bundled so they don't really break out the desired amount of disclosure. On calls they will talk you through how each product category is doing (as an FYI this makes for a really annoying exercise when you are piecing together the last five years of quarterly information), but I digress.
Of late VMW has been using excess cash flow to repurchase stock. They have spent $1B in Q3 and are committed to purchasing more in future quarters. When I met with management they said stock purchases will continue to be a prime use of cash however they will eventually have to stop repurchasing DVMT stock once they shrink the float such that Dell owns 90%. At this point they will likely move to dividends. As part of the EMC acquisition, Dell committed to providing $1B in revenue synergies. I think this is highly achievable and to be honest could actually undershoot. In speaking with a number of channel partners this was viewed as a no brainer (also a threat to NTNX but that is a story for another time).
Dell Transaction:
Dell acquired EMC which had a 81% ownership in VMW. ~35% of the ownership was retained with the Dell Holdings Co. while 65% was spun out to the public via DVMT. As mentioned DVMT is an unsecured creditor to Dell. On a pro-forma basis Dell is levered at 5x-6x net debt /EBITDA and is rapidly deleveraging and should be at 3x by the end of next year. As mentioned in the prior write-up the dividends may not flow to DVMT, there is a common stock committee appointed to ensure the rights of DVMT but there are some loopholes (replacing securities of equal value, conversion into Class C Dell Holdings shares upon an IPO, etc.).
Here is what you do need to believe and I think this point many people gloss over. Michael Dell didn't exactly leave the public markets with a good taste in their mouth. Given he would one day like to IPO again (if not I am confused how he convinced Silver Lake to join him in the LBO) he needs the public market to be welcoming with open arms. As a result DVMT is his single most direct way to re-build goodwill amongst public shareholders. As a result I think he will put DVMT shareholders on a silver platter. This is not to say he wants to give away money but I do think this tracker's sole existence was to help fund a large buyout at a discounted price. It is in Dell's interest to work to collapse the discount since it makes their 35% retained ownership in VMW worth that much more. Think about it, VMW has a $35B market cap, Dell owns a 35% direct interest in VMW - this is worth ~$12B but this $12B trades at a 35% discount so if Dell can collapse this discount it creates ~$4B out of thin air. I guess this brings up the classic efficient market debate if you see $4B sitting on the sidewalk do you bend over and pick it up?
Risks:
1) The move to public cloud accelerates as banks and healthcare companies all of a sudden become comfortable with public cloud exposure
2) Dell finds another way to screw public shareholders and officially becomes the Ron Perlman of the tech world
3) Dell goes BK and DVMT shareholders are in trouble (extremely unlikely given how much cash Dell throws off - look at where debt trades and the discussion on deleveraging)
4) VMW invests in some stupid product (luckily the past has shown this to not be the case)
Summary:
The key beliefs you need to have to get excited on VMW are as follows:
1) The transition to the public cloud will be subject to a fat tail where many customers are fast adopters and others slowly migrate over. As frame of reference VMW currently has 100% of the Fortune 100 using their software . For my model I have vSphere billings declining 20% YoY versus an average of -13% YTD (note the decline has been tapering off)
2) AWS & IBM partnerships will help cement VMW's relevancy
3) VMW's new products (vSan and NSX) will continue to grow which will add to topline growth
4) Dell will deliver on its $1B in revenue synergy promise
All this translates into double digit growth this year (mainly due to ELA renewals) and high single digits in the next couple years. This allows you to purchase VMW at ~10x 2018 TEV/FCF but when you apply the 35% DVMT discount you can purchase VMW at ~6x 2018 TEV/FCF. ~10x TEV/FCF is too cheap and VMW will probably march upwards to around $100 per share. DVMT similarly will also march upward but will also have the added benefit of a shrinking discount. Tracking stocks typically trade at some discount - the sample set is really small (mainly Malone entities) which is around 8%. But I think given the sour taste Dell left folks with 20% seems fair. As a result I can get to a ~50% return. This would be juiced to 90% if you think the discount eventually collapses to zero (which it could in a full spin or full repurchase in).
So net-net you have a chance to buy a growing company at a cheap multiple made even cheaper by a temporary discount due to added complexity. While it is tempting to just play the collapse in the VMW/DVMT discount there is more return to be made. As mentioned this is a tasty eating sardine.
The path to profitability will be accelerated by:
1) Continued VMW performance and buybacks
2) Dell deleveraging and using cash flow to repurchase DVMT shares (incredible accretive for them to do so)
3) AWS partnership launching in 2H'17
4) Dell delivering on $1B revenue synergies
show sort by |
# | AUTHOR DATE SUBJECT |
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76 | |
"I am certainly not following this as closely as some of you, so forgive a potentially very dumb question here.... but if the takeout of DVMT, with premium, is done via shares in CombinedCo, how exactly would the notion of value be determined here? Who gets to determine it? And wouldn't there be a whole bunch of natural sellers post-distribution of CombinedCo shares?" Hence when of the reasons VMW goes down every time it's rumored this is going to happen. It's a giant mess. Only part that could keep Dell board from screwing VMW minority is if they give them a majority of minority vote. And the threat of lawsuits. And reputational risk to Silver Lake. | |
74 | |
My response would be: 1) We have no idea if they need to combine w/ VMW in order to spin it all out one day tax free, as has been debated below w/ no conclusion. This is a huge part. 2) DELL IPO would be very hard to execute 3) M. Dell can steal DVMT in many ways; your way takes a few years and ultimate price he gets it for is uncertain. This way he does it right now and if he pays the 90-110 for something worth 150 he makes billions instantly. | |
72 | |
Sherman gets it wrong OFTEN so big grain of salt but: --Reverse merger more likely than IPO and DVMT would not be orphaned but acquired at a premium. Reference price is mid/high 80's before news first leaked so that should be starting point. --VMW holders *might* get a majority of minority vote. If they do, it's much more likely DVMT/VMW is protected obviously given cross ownership. I think given IPO is less likely + signaling they won't orphan DVMT if they merge with VMW, DVMT at 73 is a buy. Fair value of VMW in a world w/o Dell ownership is prob 150+ (if VMW were to run a process) so if Dell can take in DVMT at 90, 100, 110 - he is creating huge value for himself. | |
71 | |
In other news, Dodge & Cox sold ALL their VMW stock and bought more DVMT stock. They did this before the moves in Jan. Kind of crazy given they were the single largest VMW shareholder ex Dell of course. | |
69 | |
My response to that would be: 1) They suspended it and haven't bought back group at DHI level since Dec 2016 probably cause of debt issues more than anything else? 2) It is still accretive to do that even if you plan on going "nuclear" as you have no idea what the conversion price/ratio will be when that day ultimately comes. You do know, however, that paying 60 cents for a $1 today that you're in control of is pretty awesome. But sure, it could be in future that DVMT is trading at 10 cents and they should have bought none back. But they have no way of knowing what value DVMT will be trading at - it's up to the market and perceptions. Here's another excercise: If I told you tomorrow Dell announces it's going to traditional IPO, what doess DVMT do? I bet half people say tank and half say go up. | |
67 | |
If Dell sells it's VMW back to VMW - and VMW retires the share - Dell's % of ownership of VMW goes down. If they sell it back to VMW and buy exact same amount of DVMT (shares not $'s), it's % ownerhip goes up slightly - and they get the cash difference to boot! Say Dell owns 800 shares of VMW and there is 1000 outstanding. They sell 1 to VMW. Now 799/999. Their ownership declined from 80% to 79.97%. But if they buy DVMT it's 800/999. Basically something like that...lol | |
65 | |
Also re: this: I suppose if the conversion was announced, we could all get together and bid up DVMT to $1,000 and then get taken out at $1,100 ;) I think they announce a conversion and it's based on the 10 days PRIOR - not future. So you can't do this. It's a pretty nasty mechanism. Basically if at any point DVMT trades like crap 10 trading days vs. how DELL has traded those 10 days...they could force conversion in hindsight. | |
64 | |
I explained in previous post why they would buyback DVMT today & still could plan on converting DVMT into Dell common in the future. There are two very plausible reasons why they would do that. I shall repeat: 1) . They swapping VMW for DVMT. They need to keep 80% ownership. Doing this is free $. It is independant of whatever they do w/ DVMT in future. They cannot sell VMW and not buyback DVMT or they would go below 80%. It's cash generative for them today in a time when they need cash. It's a no brainer. 2) . DVMT could be worth a lot more in future, hence a reason to buy it in now in open market. DVMT will be swapped for Dell common based on 10 day ratio of EACH stock. Yes, what you said is technically correct. DVMT could go to 10 cents and the ratio would be shit. It's all based on perception of what people think DVMT is worth. Is it worth a Dell? Is it worth a VMW? It can't be worth less than one of those (I believe). As both go up in future, so will DVMT. But the million $ question is what is DVMT trading at the day Dell IPOs because that's when the "nuclear option" as you call it comes into play, indefinitely. All of this comes down to how does M Dell make the most $? It's by buying back DVMT in open market, as much as it can, and then forcing conversion. Then cleaning up capital structure w/ VMW and spinning out all his shares. Not sure they would be screwing DVMT holders here if they do it this way - it's up to the market to decide what DVMT is worth pre forced conversion/Dell IPO. Makes your head spin.
| |
62 | |
"If you talk to Dell IR about your scenario (Dell shredding DVMT and taking it out at negligable value), you'll face significant pushback. I'm not saying it won't happen, but it would make the $1.5bn in buybacks look stupid and also give MD and Silver lake an even worse reputation. Plus there's board representation that will help DVMT get treated fairly." Not negligble value. 10% premium to what Dell is trading at. And it wouldn't make the buybacks look stupid. In 2-3 years DVMT could be significantly higher given where VMW will be or DELL will be. It still makes total sense to buyback as much as they can in open market before they convert at the 10% premium. Also let's not forget they swapping VMW for DVMT - not just using new $ to buyback DVMT. So it's very accretive. The board representation cannot stop the conversion from happening, it's in the docs. Why it's in the docs beats me. | |
61 | |
In the very unlikely chance they do the reverse merger, that would basically be the only time I think DVMT would have ended up being worth 1 VMW though many expect that not to be the case if this ends up happening. They expect DVMT to get a premium to trading prices but not VMW value. But after our conversation & that Morgan note I think the odds of a reverse merger into VMW today is sub 10% as outlined in my posts below. One DELL IPO's, I can't see any reason why DVMT won't track DELL stock price almost identical in daily moves - and have little to do with VMW. However DELL should correlate pretty closely with VMW given it will be so much of the equity value. The only questions will be what will the DMVT discount to VMW be that day? Also have the dynamics of DELL buying up DVMT in open market for 2 full years before it's consumed. | |
59 | |
So why did every smart fund in the land pitch it as a pair trade? It was written up THREE times on here (one is under VMW)!. I mean virtually every writeup just linked it to VMW and assumed you'd get your VMW one day. Dell common, in a lot of ways, is turning into VMW though as VMW price has exploded and Dell Core is absorbed by most of the debt. What do you think about that? That Dell common is basically just a HoldCo for VMW shares at this point? | |
53 | |
I think that's the most interesting part of your discussion - that they need to merge them together to then seperate them. If that's true, it's huge yes. But it's not mentioned once in the Morgan note. People seem to think once merged it will stay merged forever - and be value destructive to everyone. M Dell not that stupid. The good thing about DVMT - I believe - is we are alligned w/ how M. Dell will make the most $. Impossible to know what DVMT will be worth in a year or two, but fairly certain it's much higher. | |
51 | |
yes and no. a Dell IPO today accomplishes two things. it helps the interest deduction issue AND it starts the clock on forced conversion of DVMT at a 10% premium. i think both are big deals. once you accomplish both of those, then you can figure out the tax basis stuff whether it can be a spin out 2021 tax free or if you can't, then you merge into VMW and then do it at a later date. basically what you said a few posts ago. if you do reverse merger today you screw up the whole DVMT value accretion angle being able to buy tons of stock in open market next 2 years at huge discounts + the forced conversion at 10%. also reverse merger doesn't raise any $ so makes the interest deductability thing less helpful. and finally, you need VMW majority of minority vote which i doubt happens at this juncture. maybe in a few years when DELL is in better shape balance sheet wise and DVMT is all cleaned up. | |
47 | |
Condor - agree w/ 100% of what you just wrote. But to me, the remaining questions are: Can Dell even IPO? What will market value it at? I've already come to the conclusion they won't be able to reverse merge today and that it doesn't maximize M. Dell value anyway. A Dell IPO + buying as much DVMT in open market then forced coversion is how to maximize M Dell value. Basically what buggs said a long time ago. Does Dell need to do the middle step (eventually merge w/ VMW) to then spin it all out tax free? Buggs makes it sound like they do not - they just need to wait till 2021. Most importantly, I agree w/ you why DVMT opportunity exists right now. It's basically impossible to value it - thus most will stay away. I know that makes for an odd investment case, but that's where I'm at. I bought DVMT last week and this week and have no VMW hedge. I only really see 2 options for DVMT: They reverse merge w/ VMW and DVMT gets a fair value given cross ownership (low chance) They IPO and buyback ton of DVMT in open market and forced conversion. I'm fine w/ this. As DVMT float gets smaller and smaller hopefully it will close it's gap w/ VMW. If it doesn't, we'll still participate via implied long Dell C which is *mostly* just ownership in VMW anyway when you back out the Dell Core EV from the capital structure. | |
45 | |
So they can't spin it out in 2021 tax free? | |
42 | |
Out with a note today that basically says Dell will destroy value for himself if he combines w/ VMW as the NewCo multiple will be atrocious. Says best way for him to make the most $ is to continue buying back DVMT at huge discount and keeping the companies seperate even w/ the new tax law. Thinks if Dell IPO's or does nothing (maybe asset divestiture) VMW goes back to where it was before and DVMT discount goes back to 25-35%. It's an interesting note as it does seem like NewCo would get a pretty crappy multiple when all is said and done given the leverage and the blend of hardware biz and Dell has got to know that. If they were exiting the public markets it wouldn't matter but in all options NewCo would be publicly traded. | |
41 | |
Something I found interesting this morning: Top 3 shareholders of DVMT are Vangaurd, Blackrock, and Dodge & Cox. They own 42.5m shares combined worth ~2.8B. These same 3 shareholders are #1, #2, and #4 at VMW. ~They own 14M shares worth ~1.72B (Blackrock has been selling). The public float of VMW is ~73M. In order for any transaction to go through (except a Dell IPO), the majority of the minority needs to approve. Assuming 85% of the 73M votes in a transaction, means there would be 62M votes cast. They would need 31M to get a deal through. Those 14M shares would be a solid NO unless at the time of vote, DVMT was treated fairly, aka, they knew it wouldn't be an orphaned security post Dell/VMW deal. The DVMT stock is worth more to them than the VMW stock and worth much more if it's not at a 40% discount! I also think you could have arbs/funds buy DVMT & VMW to assist in blocking the vote, forcing Dell to deal w/ DVMT. All of this is kind of moot because two of the articles said Dell does not plan on keeping DVMT outstanding in the event of a VMW reverse merger. So the only question was/is would DVMT be treated fairly at deal time? I think this proves they will have to be treated fairly...or nothing is going to get done. Importantly, valuing DVMT at or near VMW does not screw M. Dell or Silver Lake in any way - just doesn't create free $ for them. But cleaning the structure up and eliminating the tracker discount would be good for Dell and Silverlake's own VMW position. So let's say, given all the hurdles, the odds of a VMW/Dell merger are rather low and they opt for an IPO. Wasn't this what was always going to happen, albeit maybe 1-2 more years down the road? And why should we assume the DVMT would trade in the dumps post announcement of an IPO or actual completion of an IPO? Yes, it will no longer necessarily be linked to VMW given the conversion option of DELL and that creates a lot of confusion. But aren't we getting paid for this uncertainty w/ the 40% discount? And isn't it more likely they do what buggs said - at least for the first two years - keep the tracker public and buy as much of it as they can at big discounts - then retire it year 2 and day 1? And if Dell ever wants to combine with VMW (maybe they don't and they do what buggs thinks they will do) they surely don't want to piss off the 3 of the top 4 VMW shareholders who will almost certainly be top shareholders of a Dell IPO and will be completely screwed by a DVMT screwing/conversion at poor prices. It seems to be Dell DOES want to combine the companies and the only way to do that is to treat DVMT fairly. | |
39 | |
JetsFan - very helpful thanks. My question is did they *have* to buy back DVMT w/ the VMW proceeds to keep the ownership at 80%? Might be irrelevant but it seems to me to be crucial. buggs: They wouldn't be paying for VMW - it would be a reverse merger w/ DELL stock obv. Yes, they'd have to be very generous w/ valuation to get VMW to go along with it. VMW shareholders GET A VOTE so it's not up to the boards. I do think they are actively looking at it but who knows if they can get there on price. | |
35 | |
I've confirmed that: Any transaction with VMW would need to go through VMW special committee and need majority of minority. So there is no risk of DELL ripping off VMW shareholders. DVMT holders, on the other hand... ??? | |
34 | |
I'm sorry that I am unqualified to judge that last part, just thought the DVMT alignment with Dell (& long-short DVMT-VMW) was an interesting implication in this scenario.. based on the spread growing, it seems the market thinks a reverse merger is unlikely. From a distance (I'm an uninformed outsider here), diluting VMW with a bunch of private businesses & debt for specific seller benefits just seems wrong. Any others? Baupost sold & the spread blew out while the visibility on the tax plan got better. | |
33 | |
Punchcardtrader- Really helpful and now I jumped back in the pool. Question: Wouldn't VMW minority shareholders get to vote in any combination thus assuring your "real doom" part doesn't happen? Or is it just up to the VMW independent board members? | |
32 | |
So this scenario is consistent with the mention by specialk of the action "Dell selling VMW shares to acquire DVMT".. in that case Dell just sold a dollar to reacquire it at a fraction and to crystalize it again (share-for-share offer by VMW on Dell / DVMT). To be clear the following is a reasoning based on the reverse merger scenario (I'm not calling this scenario) As I see it in this scenario:
The last step means that DVMT and old VMW float holders get diluted "together" for Mr. Dell's private stake (after DVMT's step up to its intrinsic old VMW shares value). = this means a long-short DVMT - VMW is an interesting way to play this scenario (it seems this is how the market reacted to this rumour) I submitted the Mobius strips tag because I'll be needing it in my next write-up! | |
31 | |
*head explodes* This one is just too hard for me. | |
29 | |
"Presumably this would eliminate the 2 tracker bear cases, specifically the elimination of VMW as a public entity and swapping Class C for DVMT." Would it? NewCo wouldn't be VMW it would be NewCo. DVMT would be orphaned tracker no? Or maybe NewCo would be Dell Class C stock. | |
27 | |
The negative scenario put forward of 1. take VMW private 2. IPO Dell 3. Convert DVMT seems to me to assume that Dell Class C will be able to execute an IPO and will have stock that trades near or above intrinsic value. Are those reasonable assumptions given the complexity, leverage and reputation? A significant portion of Dell's equity value is the potential value spread betwen VMW and DVMT. I struggle to see the public market giving credit for that. If Dell Class C trades at a material discount to intrinsic value, the cost of converting DVMT would be problematic. That said, I don't understand why Dell Techologies doesn't increase their margin loan and use the proceeds to tender for DVMT. I appreciate the comments about wanting to be investment grade but there is free money available to a savvy player and who knows if the spread remains this wide. After Friday, they could probably get a decent amount tendered at a 33% discount. It is just so easy and quick compared to everything else being discussed.
| |
25 | |
" It is true that there is no hard mechanism tying DVMT to VMW and the likely endgame is eventual conversion to Dell shares" I think this is what the market is most afraid of - though VMW going up would suggest otherwise though that could just be the function of arbs taking off the spread. | |
24 | |
It has been well known since DVMT was trading when issued that owners of DVMT were risking getting screwed by Dell either by bankruptcy or purposeful screwing. The theory was that Dell would not purposely screw DVMT holders because it would queer Dell's ability to ever return to the public markets and because big boys who have the resources to fight back (Elliott, Baupost etc.) accepted DVMT shares as consideration and have held since the merger closed over a year ago, although the aforementioned have been reducing their stakes. Would Dell really screw the people it convinced to accept DVMT shares after just over a year? My understanding is they couldn't buy all of VMWare for at least two years (end of 2018) or spin out the whole thing until 2020 or 2021. Dell has stated that it wants to get its credit rating to investment grade. It already consolidates VMWare for leverage calculation purposes. I am not deep enough into the credit documents to know how exactly the calulcations account for the 18% of VMWare it doesn't own and minority interest, but does it make sense for them to spend $12B (presumably debt-funded) to get credit for an additional $590M or so of EBITDA? Obviously not credit-enhancing to say the least. I believe Dell bonds have traded generally well even though EMC has not performed as expected. I think they traded up today. Is that consistent with taking on a bunch of new leverage? Dell was losing some interest deductability as a result of tax reform which limited interest deductability to 30% of EBITDA. Will they take on a huge amount of debt for relatively little incremental EBITDA at high incremental interest costs? Dell was recently selling its directly held VMWare shares back to VMWare to fund repurchases of DVMT. Does this make sense if your end game was to buy out VMW at a premium? Both EMC and Dell have stated the importance of having VMW stock seperate to compensate software talent. Do they want to have the same software talent retention as HP or IBM? It's not impossible that Dell will buy out VMW and screw DVMT holders but it strikes me as pretty unlikely and an extreme about-face. I think this was a throw-away line in a story and what they are really looking at is an IPO of Dell or another subsidiary to raise money to pay down debt. It is true that there is no hard mechanism tying DVMT to VMW and the likely endgame is eventual conversion to Dell shares but I would guess Dell will put a stop to this particular speculation in the next few days. I think what happened today is some arb funds had a spread convergence trade on with leverage and someone panicked and unwound, leading others to do the same. | |
23 | |
This thread explains why the spread is blowing up...I have no idea how you weigh it against what's been said below here, just passing it along. https://twitter.com/ValuewaCatalyst/status/956922819308384257 | |
15 | |
stub widening today. per my understanding, they can convert DVMT shrs into reg Dell shares in an IPO at a 20% premium to DVMT shrs (not sure on exact mechanics). Does this permanently impair the ability for the spread to tighten significantly?
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12 | |
Any thoughts on the chance of a buyback announcement - know that Dell keeps a close eye on the spread and now seems like a good time |
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