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> It's trading at a 35% discount from VMW, which is pretty steep. Sure is, but keep a few things in mind.. 1) This is the first time tracking stock has been i

> It's trading at a 35% discount from VMW, which is pretty steep. Sure is, but keep a few things in mind.. 1) This is the first time tracking stock has been issued on a public company so there are alot of people out there who aren't really sure what to make of this class instrument yet. 2) You'd expect a steep discount due to liquidity and lack of typical share holder rights. For example, if VMWare did pay a dividend, then the tracking stock would not necessarily have to pay that out to unit holders. 3) EMC paid a dividend. There are alot of funds that bought EMC to get the dividend. They've been forced to sell the tracking stock as VMWare doesn't pay a dividend and the tracking stock won't pay one.

jambo 10y ago
The big one, as far as I can tell (I've been reading through the prospectus and the latest dell 10q), is that the tracking stock is actually an unsecured interest in Dell (Dell Class V shares). So, you're exposed to Dell going bankrupt: secured creditors would get the vmware stake if Dell can't pay the ~ $1.6 Billion in interest they owe per year.
loeg 10y ago
> 1) This is the first time tracking stock has been issued on a public company so there are alot of people out there who aren't really sure what to make of this class instrument yet. I don't think it's the first time. https://en.wikipedia.org/wiki/Tracking_stock https://en.wikipedia.org/wiki/Tracking_stock has some examples (although I don't know if those are public companies). I thought I had heard of other examples in the articles about the deal. > 2) You'd expect a steep discount due to liquidity and lack of typical share holder rights. For example, if VMWare did pay a dividend, then the tracking stock would not necessarily have to pay that out to unit holders. Sort of. The tracking stock is non-voting, but I'm not sure how much that matters. (You'd expect a small discount for that.) VMware doesn't have a dividend now, so I don't think that should influence the tracking stock price much. > 3) EMC paid a dividend. There are alot of funds that bought EMC to get the dividend. They've been forced to sell the tracking stock as VMWare doesn't pay a dividend and the tracking stock won't pay one. Sure, but theoretically VMW shareholders (anyone who thinks VMW is a buy or hold) should be incentivized to buy a bunch of cheap DVMT, propping the price up relatively close to VMW. Why do VMW shareholders think VMW is worth ~$73 but DVMT isn't worth more than ~$46?
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jambo 10y ago

The big one, as far as I can tell (I've been reading through the prospectus and the latest dell 10q), is that the tracking stock is actually an unsecured interest in Dell (Dell Class V shares). So, you're exposed to Dell going bankrupt: secured creditors would get the vmware stake if Dell can't pay the ~ $1.6 Billion in interest they owe per year.

loeg 10y ago

> 1) This is the first time tracking stock has been issued on a public company so there are alot of people out there who aren't really sure what to make of this class instrument yet. I don't think it's the first time. https://en.wikipedia.org/wiki/Tracking_stock https://en.wikipedia.org/wiki/Tracking_stock has some examples (although I don't know if those are public companies). I thought I had heard of other examples in the articles about the deal. > 2) You'd expect a steep discount due to liquidity and lack of typical share holder rights. For example, if VMWare did pay a dividend, then the tracking stock would not necessarily have to pay that out to unit holders. Sort of. The tracking stock is non-voting, but I'm not sure how much that matters. (You'd expect a small discount for that.) VMware doesn't have a dividend now, so I don't think that should influence the tracking stock price much. > 3) EMC paid a dividend. There are alot of funds that bought EMC to get the dividend. They've been forced to sell the tracking stock as VMWare doesn't pay a dividend and the tracking stock won't pay one. Sure, but theoretically VMW shareholders (anyone who thinks VMW is a buy or hold) should be incentivized to buy a bunch of cheap DVMT, propping the price up relatively close to VMW. Why do VMW shareholders think VMW is worth ~$73 but DVMT isn't worth more than ~$46?

deleted 10y ago
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