Dell Stock Buyback Struggles As PC Business Goes Into Free Fall
Michael Dell’s quest to buyback his company continues with recent developments regarding private equity firms and their unwillingness to participate in a process called “go-shopping.”
Go-shopping is a period after a deal is announced in which the target company, in this case Dell, shops around to see if there are any other bidders. Go-shops were first used in private equity buyouts that demanded exclusive negotiations. The board agrees to the exclusivity, but with the caveat that it gets a period of time when alternative bids can be solicited. This step assures the board that the company will be sold to the highest bidder.
But in Dell’s case, instead of getting more bidders interested in the company, it seems that it’s driving potential buyers away as Blackstone Group exited the deal.
Joining Kristin Feledy on this morning’s NewsDesk is SiliconANGLE Founding Editor Mark “Rizzn” Hopkins with his Breaking Analysis on Dell.
The New York Times described in great detail the pitfalls of “go shop” stating that this move is rarely successful saying that they are rarely successful at getting more than one bidder to compete for the purchase of a company, so why did Dell choose to go with this ritual?
“I have to think that this is by design,” Hopkins stated. “When you have a public company you have a responsibility to the shareholders and certainly Michael Dell is a shareholder in Dell, but as are millions of investors, thousands of stakeholders, and the board members themselves all hold competing interest in Dell to Michael Dell himself. Michael Dell wants the lowest price he could possibly get for his company without signaling to the market that the company is about to collapse or something. He’s willing to get a reasonable price and I think that price is something like $14 or $16 a share… But that was the last bid that I saw that Dell put in and they accepted that bid, but the responsible to the shareholders is that they’ve got to go get some competing bids… The go shop, as we said is like the least effective way to get competing bids, but it does satisfy the requirement to the shareholders while still allowing Michael Dell a fair shake in buying his own company back.”
To learn more about what’s happening in the Dell deal and for more of Hopkin’s Breaking Analysis, check out the NewsDesk video below.
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