Dell Technologies Inc. agreed to pay $1 billion to settle a shareholder lawsuit relating to a controversial 2018 stock conversion transaction.
(Bloomberg) — Dell Technologies Inc. agreed to pay $1 billion to settle a shareholder lawsuit relating to a controversial 2018 stock conversion transaction.
The settlement, if approved by the court, will end the dispute over the $23.9 billion conversion of Dell stock in a deal four years ago. In that transaction, Dell founder Michael Dell and other controlling investors including Silver Lake Partners, authorized the issuance of common stock in exchange for tracking shares. The plaintiffs alleged that the transaction was billions of dollars below market value, according to a company filing.
The share conversion was for a class of Dell stock created as part of the 2016 acquisition of EMC Corp. The lawsuit was set to go to trial in the Delaware Court of Chancery next month, said a spokesperson for Quinn Emanuel Urquhart & Sullivan LLP, the firm representing the shareholders.
The settlement amount will be reflected in Dell’s fiscal third quarter results, which will be reported on Monday. The company’s $7 billion balance sheet will help to cushion the impact of this payment, and it shouldn’t impact its spending strategy, wrote Bloomberg Intelligence’s Woo Jin Ho. It also “eliminates a modest nonoperational overhang on the company.”
The settlement includes attorney fees and covers claims against Goldman Sachs Group Inc., which advised Dell in the transaction.
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