Raymond James Cuts VMWare Price Target, Says Dell Agreement Good For Shareholders

VMware, Inc. (NYSE: VMW) has distributed a special dividend of $26.81 per share related to the completion of the Dell Technologies (NYSE: DELL) Class V common stock (DVMT) transaction Dec. 28.

The agreement requiring Dell to seek approval for future share acquisitions or special dividends should be comforting for VMware’s shareholders, according to Raymond James.

The Analyst

Raymond James’ Michael Turits maintained a Market Outperform rating on VMware and cut the price target from $190 to $163.

The Thesis

The special dividend was distributed to all shareholders and helped finance the buy-in of the DVMT tracking stock by Dell Technologies, Turits said in a Tuesday note.

This seems to be the best outcome for VMware’s shareholders, as it eliminates the possibility of a reverse merger in the foreseeable future, the analyst said, adding that a reverse merger would have destroyed shareholder value.

As part of the transaction, VMware entered into a governance agreement that puts restrictions on Dell to acquire VMware’s shares or request another special dividend. For Dell to do either, it would need to seek approval from an independent special committee on VMware’s board of directors.

This agreement is good news for VMware’s shareholders, Turits said. If a merger does take place in the future, it will need to be explicitly approved by the independent committee despite Dell's majority control, he said. 

Price Action

VMware shares were down 1.11 percent at $145.47 at the time of publication Wednesday. 

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