6 Big Dell Stock And VMware Share Numbers To Know Post Spin-Off

From Dell Technologies shares cutting in half to how much VMware stock Michael Dell now owns, CRN breaks down five key important stock, shareholder and key company information that investors and channel partners should know.

The stock market effects and shareholder numbers from Dell Technologies’ spin off of VMware are now officially in, revealing signs of things to come.

It was a “landmark day for VMware” when Dell Technologies spun out its 81 percent majority stake in VMware this week, making VMware a standalone company for the first time since 2004, said VMware CEO Raghu Raghuram.

“We are a standalone company once again,” said Raghuram, who’s been with VMware for 18 years, in a blog post. “We now have the flexibility to partner even more deeply with all cloud and on-premises infrastructure companies to create a better foundation that drives results for our customers. And increased flexibility we will have to use equity to complete future acquisitions will help us remain competitive.”

Likewise, Dell Technologies founder CEO Michael Dell said the spin-off of VMware will unlock significant value for stakeholders and put Dell “full speed ahead.”

“We are full speed ahead, solving customer problems, driving progress and capturing opportunities in areas like multi-cloud, edge and telecom,” said Michael Dell, who is also chairman of both Dell and VMware.

From Dell Technologies shares cutting in half to how much VMware stock Michael Dell now owns, CRN breaks down five key stock, shareholder and company information that investors, channel partners and customers should know based off several Dell and VMware filings with the U.S. Securities and Exchange Commission.

Michael Dell Owns 170 Million Shares Of VMware

The IT industry legend is the largest shareholder of Dell Technologies stock, which means when VMware’s 81 percent stake was spun out to Dell shareholders, Michael Dell became the largest stockholder of VMware.

Michael Dell received 155,005,746 shares of VMware Class A Common Stock, according to a Dell filing with the U.S. Securities and Exchange Commission.

Based on 419,662,495 shares of VMware Class A Common Stock outstanding as of October 29, 2021, Michael Dell’s portion of VMware’s stock is 37 percent, according to the regulatory filing.

However, the roughly 155 million shares exclude 14,272,269 shares of VMware Class A Common Stock owned by Susan Lieberman Dell Separate Property Trust and Susan K. Dell, which Michael Dell may deem to beneficially own, said the SEC filing. The 14.27 million in additional shares represent roughly a 3.4 percent stake in VMware.

This means, in total, that Michael Dell now owns approximately 170 million shares of VMware.

Michael Dell received his 155 million in VMware shares because he owned 346 million shares in Dell Technologies Class A common stock and 6 million shares in Dell Technologies Class C common stock at the time of the transaction, according to SEC filings.

Dell Gets Its Wish: Investment Grade Rating From Major Credit Rating Agencies

One of the main reasons Dell spun out VMware was in order for Dell to achieve an investment grade rating.

As soon as the transaction was complete, three major credit rating agencies— S&P Ratings, Fitch Ratings and Moody’s— all upgraded Dell’s credit rating from ‘High Yield’ to ‘Investment Grade’.

This paves the way for Dell to attract new types of investors due to an improved capital structure for capital allocation.

Dell will use billions it received in cash proceeds from the VMware transaction to pay down its large core debt.

For example, prior to the spin-off, Dell’s large debt “has adversely impacted the credit ratings of VMware,” said VMware in a recent SEC filing. “VMware’s credit rating will no longer be impacted by the debt of Dell Technologies and its remaining subsidiaries following the separation.”

Dell’s Stock Price Cut By 50 Percent

Dell’s stock price per share was slashed in half on Tuesday following the spin off.

The company’s share price dropped from $111.51 per share Monday evening to $55.12 on Tuesday morning. Dell’s market valuation was cut in half following the completion. The move reflected the adjusted market value of the company post-VMware.

Dell’s market cap currently stands at around $211 billion as of Wednesday afternoon.

As of Wednesday afternoon, Dell’s stock was trading up less than 1 percent at $54.90 per share.

Livy Investment Research in a note today predicted that Dell’s stock could climb upwards of 30 percent over the next 12 months.

“Depending on the upcoming announcement of Dell’s fiscal third quarter results, combined with management’s outlook on the company’s performance for the rest of the fiscal year considering ongoing supply constraints which is expected to hamper the biggest sales quarter of the year, any optimistic sentiment could potentially boost the stock’s valuation prospects over the next twelve months by up to 30 percent,” said Livy Investment Research in a note today.

Livy Investment Research’s 12-month price target for Dell is $67.43.

After Fees, Dell Receives $9.3 Billion

In total, subtracting the transaction fees of the deal, Dell Technologies received cash dividends of $9.3 billion from the spin-off.

The proceeds will be used towards paying down Dell’s core debt balance, said Dell in an SEC filing, which helped in its move to achieve an investment grade rating. Dell is currently undergoing an aggressive de-leverage strategy, with a goal to reach its core leverage ratio target of 1.5x, according to Livy Investment Research. The said ratio is estimated to stand at approximately 2.0x following the VMware spinoff and the subsequent pay down of Dell’s core debt with related net cash proceeds, said Livy.

“We are unlocking significant value for stakeholders, while maintaining our close partnership in sales, support and innovation for our customers,” said Michael Dell in a statement today.

VMware distributed a special cash dividend of $11.5 billion to all VMware shareholders, including Dell Technologies $9.3 billion.

Final Distribution Ratio To Dell Stockholders: .440626 Shares Of VMware

Dell Technologies’ final distribution ratio for the special dividend of its shares of VMware Class A common stock and Class B common stock to Dell Technologies stockholders is .440626, meaning each Dell shareholder gets roughly 0.44 shares of VMware.

Dell shareholders received 0.44 of a share of VMware Class A common stock for each share of Dell Technologies common stock held as of 5p.m. on Oct. 29, according to a Dell filing with the U.S. Securities and Exchange Commission.

Each share of VMware Class B common stock has been converted into one share of VMware Class A common stock. Dell Technologies stockholders will receive cash in lieu of any fractional shares of VMware Class A common stock, according to the SEC filing.

Final Share Count: 337,990,441

The spin-off was completed through a special dividend of 30,678,605 shares of VMware Class A Common Stock and 307,221,836 shares of VMware Class B Common Stock distributed to Dell’s stockholders of record as of 5p.m. on Oct. 29.