Dell: tracking stock tracked

Author: Amélie Labbé | Published: 19 Sep 2016

Dell’s acquisition of IT storage specialist EMC may have been notable for the huge price tag ($67 billion) but its use of one of the more unusual types of equity offerings has caught the market's attention too.

In addition to an initial $24.05 per share payout, EMC shareholders received tracking stock whose value is linked to the performance of its cloud software division, VMware. The unit is one of EMC’s many businesses, all of which were part of the takeover – these include security company RSA, software specialist Pivotal and big data analytics group Greenplum.

Dell has hinted in various official documents that it did not have the necessary cash to fund the acquisition of EMC and of its various businesses, so issued so-called tracking stocks to bridge the funding gap. They account for a significant portion of EMC’s 81% share in VMware.

Dell's EMC takeover is...