Dell says it is evaluating a potential public offering or a combination with VMware
Sonam Rai / Reuters :
Context & Ripple Effects
Dell's confirmation that it is weighing an IPO or a combination with VMware lands one week after reports that its board would meet to discuss strategic options, and days after CNBC reported the more exotic variant: selling Dell to VMware — which it already owns ~80% of — in a reverse merger that would make Dell publicly traded without a formal listing. The company is choosing among routes to public markets rather than deciding whether to go public at all.
First-order effects
- Dell's board must now pick between a conventional offering and folding into VMware, with the reverse-merger path trading listing formality for speed — and leaving VMware's ~20% minority holders facing dilution or a changed company either way.
Second-order effects
- Investment banks have a mandate to fight over whichever structure wins: reporting later in 2018 showed Dell interviewing banks for a traditional IPO as a backup if its preferred route to public markets fell through.
Third-order effects
- The structure keeps being revisited rather than settled — by mid-2020 Dell was examining a spinoff of its roughly $50B VMware stake — pointing toward a long unwind of the Dell-VMware combination into separately valued companies.
The trend: Dell's ownership of VMware is being progressively restructured through whatever market mechanism is cheapest at the time — reverse merger, tracking stock, IPO, and eventually spinoff.