Sources: Dell considers a sale to VMWare, of which it owns 80%, in a reverse merger, which would allow Dell to be traded publicly without formal IPO
- VMware could buy Dell in massive reverse-merger, sources say. Dell currently owns 80 percent of VMware.
Context & Ripple Effects
This report lands three days after sources told Bloomberg that Dell's board would meet this month to weigh strategic options including an IPO or buying in the 20% of VMware it does not own. Within days Dell confirmed publicly that it is evaluating a potential public offering or a combination with VMware, so the reverse-merger idea is one branch of a live process, not a leak into a vacuum.
The mechanics matter because Dell already owns 80% of a listed company: having VMware acquire its parent would hand Dell public trading without underwriting an IPO. In the event, Dell chose a different branch of the same menu — by December it had voted to buy back the VMware tracking stock and relist on the NYSE under DELL — which makes this January report the earliest documented step in the path back to public markets.
First-order effects
- VMware's minority shareholders would see their pure-play software stake converted into exposure to all of Dell, since the subsidiary acquiring its 80% owner collapses the two equity stories into one ticker.
- Dell gets a liquid public currency for its shares without paying IPO underwriting fees or enduring a roadshow, directly answering the strategic-options question its board convened to resolve.
Second-order effects
- VMware stops trading as an independent company, forcing investors who held it for the software business alone to re-underwrite a combined hardware-and-software entity or exit.
- A confirmed combination would have closed off the alternative the board was weighing — a straight IPO or a full buy-in of VMware — concentrating negotiation leverage with whoever set the exchange ratio between the two shareholder bases.
Third-order effects
- The episode, resolved instead through the tracking-stock buyback and direct NYSE listing, established that a private company holding a majority of a public one has multiple engineered routes back to markets — the traditional IPO is only one option on the menu.
- If reverse mergers of this kind became routine for large private tech owners, control premiums and minority-shareholder protections in majority-owned public subsidiaries would become a recurring governance battleground.
The trend: Large private tech companies with majority stakes in public subsidiaries are treating the public markets as something to be re-entered by structuring — reverse merger, tracking-stock collapse, direct listing — rather than reached only through a conventional IPO.