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Pat Stout
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Education is in finance and economics. Seek long term strategic trends while keeping an eye open for short-term tactical opportunities. Pay close attention to cash-flow statements and the allocation of capital. Prefer management and board that return monies to owners via dividends. Warning... More
  • What Will Dell's Board Do? 0 comments
    Feb 2, 2013 2:59 PM | about stocks: DELL

    There are media reports suggesting Dell (NASDAQ:DELL) might go private with a potential buyout at $13.00 to $14.00. However that price might need some improvement. Here is why.

    According to Dell's SEC filings. The board of Dell has spent over $32 billion repurchasing 1.2 billion shares for an average cost of $26.67. Granted this transfer of owner's monies to departing owners was expended over a number of years and a deal at this price doesn't seem likely.

    However, for the nine months ending November 2012 the board spent $700 million repurchasing 46 million shares for an average cost of $15.22. If a deal is to be done, it should be a premium to this price. Otherwise the board will admit to overpaying for the shares more recently repurchased, wouldn't they?

    Dell has a number of long-time board members and it shall be interesting if they will entertain and or approve a bid that would sell the company at a price below the more recently purchased shares.

    In my opinion, had the board returned cash to owners, rather than to stock sellers the price today might be far higher, being supported by a generous dividend.

    Time will tell what happens with the rumors of a deal and if a deal is done what the price might be. Should Dell's board agree to a deal below its more recently purchased shares, it should put to rest the notion that share repurchases add value, wouldn't it?

    Disclosure: I am long DELL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Stocks: DELL
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