After Dell Pushes Back Record Date for Buyout, Hedge Funds Respond By Buying Dell Shares


Shorter term investors looking for a quick exit now eligible to vote on the Michael Dell/Silver Lake buyout.

The much-discussed Dell buyout previous had a record date of June 3, meaning you had to be a stockholder on that day to vote on the deal.  When opposition to the deal arose, Dell moved the meeting date back to try to garner support.

Earlier this month, Dell again postponed the meeting and took the additional steps of increasing the buyout price and moving the record date.

This happened a few weeks ago. You may ask, why are you writing about it now?

Well, let us tell you.

After tossing some goodies to the shareholders, the delay allows Dell to drum up support for the deal.  In addition, it allows some arbitrage types the opportunity to jump into the fray and buy some shares before the record date who will naturally be inclined to vote for the deal.

According to Bloomberg, hedge fund holdings of Dell more than doubled from March 30 to June 30, from 6.5% to 18% (which is not quite tripled, headline notwithstanding.  It is still a compelling story without the hyperbole.).  This includes Underdisclosed favorite, Elliott Associates.

The amended merger agreement provides that the approval of a majority of the disinterested stockholders is required.  Michael Dell held 13.92% and the other officers and directors held another 0.79%, as disclosed in their proxy statement for the deal.  This leaves about 85.3% as unaffiliated, of which two significant stockholders opposing the deal hold 8.9% (Carl Icahn) and 4.0% (Southeastern Asset Management).  This presents a bit of a hurdle to get to 50% of 85.3% to approve the deal, particularly since there is additional opposition out there.

Encourging the arbs to buy brought the significance of their holdings to over 21% of the necessary vote as compared to 7.6% prior to the postponement of the record date.

DELL has been trading north of $13.70/share for the better part of August and is at $13.82/share at this writing as Carl Icahn’s lawsuit has been thwarted by the court.

Dell encourages merger arbs to buy its shares in bulk. I get to use the term “merger arb” like a real industry professional.

This entry was posted in Activist Investor, Business Strategy, By the Numbers, Carl Icahn, Elliott Associates, Hedge Funds, Lawsuit, M&A, Private Equity, Shareholder Meeting, Trading Strategy and tagged , , , , , , , , , , , , , , , , , . Bookmark the permalink.

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