Dell Stock Pops As VMware Spinoff Yields Big Tax-Free Special Dividend



Shares in Dell Technologies (DELL) popped in after-hours trading on Wednesday on news that it’ll reap a cash dividend from the spinoff of VMware (VMW). While Dell stock popped, shares in VMware slipped a fraction.


VMware stock and Dell announced terms of the spinoff after the market close on Wednesday. Dell disclosed plans to spin off enterprise software maker VMware in mid-2020.

Dell owns 81.6% of VMware, considered a leader in virtualization software. Widely used in corporate data centers, virtualization software enables computer servers to run different operating systems and apps, and thus share workloads.

Dell stands to get the lion’s share of a $11.5 billion to $12 billion special cash dividend approved by VMware’s board.

The companies expect to close the spinoff during the fourth quarter of calendar year 2021.

Dell Stock: Tax-Free Spinoff Sought

Dell stock jumped 8.4% to 100.47 in after-hours trading on the stock market today. VMware stock slipped 0.3% to 155.

Analysts have noted that a tax-free spinoff would have to wait until September 2021 — five years after Dell merged with data storage firm EMC. Dell’s majority ownership has been an overhang on VMware stock.

Dell stockholders will receive a pro-rated distribution of VMware shares held by Dell Technologies. Dell founder Michael Dell and Silver Lake Partners will own direct interests in VMware.

The two companies said they have finalized a commercial agreement that preserves their strategic partnership in delivering products and services.

VMware trades below an entry point of 162.05. Dell stock is extended from an entry point of 71.55.

Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.

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