Carl Icahn Buys Dell – Again
Carl Icahn issued an open letter to stockholders of Dell on July 31 that reported:
But no one would believe, and with good reason, that I would risk $3 billion because I am outraged at the treatment of stockholders at Dell. While I am enraged, the major reason I am involved is that I believe the Michael Dell/Silver Lake transaction undervalues the company. Perhaps the most important reason is Dell has a major liability that can be easily removed and that I believe would make the company a great deal of value. It is the CEO, Michael Dell.
The same day Icahn Enterprises and Southeastern Asset Management released a joint letter to Dell’s Special Committee which discussed the two funds’ angst with Dell’s continuous postponing of the meeting which would allow shareholders to vote for or against the Michael Dell/Silver Lake buyout. The letter reported:
The Dell Board must consider this question seriously and should prevent Michael Dell from buying votes by buying shares. What we view as the ill-effects of Michael Dell’s influence have been broadly felt. Since Michael Dell returned as CEO, the stock has dropped from $24.22, to this morning’s price of $12.46.
You can view Carl Icahn’s open letter to shareholders and the joint letter to Dell’s Special Board here.
Icahn is currently suing in a Delaware court to force the company to hold its annual meeting — set for Oct. 17 — on the same day as the vote on the deal, which is currently set for Sept. 12.
Following this letter to the shareholders, Carl Icahn went ahead and purchased more shares, as reported on Aug. 1. The activist investor bought an additional 4 million shares of Dell at approximately $13.68 per share. The guru bought the shares Thursday, the same day he filed suit to block any further delay in the shareholder vote and a day before CEO Michael Dell upped his bid for the company.
Icahn’s most recent increase in his holdings gives him a total of 156,478,650 shares of Dell, representing 8.73% of the company’s shares outstanding.
The company offers a range of technology solutions, including servers and networking products, storage products, services, software and peripherals, mobility products and desktop PCs. The technology company has been struggling to keep up with the evolving nature of consumers away from the personal computer and towards tablets and smartphones.
Dell’s historical price, revenue and net income:
If shareholders vote in favor of Michael Dell's bid, it will be the first time in over 28 years that the company will become a private entity.
The Peter Lynch Chart also shows that the company appears to be undervalued:
Dell has a market cap of $24.09 billion. Its shares are trading slightly up today at around $13.73 with a P/E ratio of 12.80, a P/S ratio of 0.40 and P/B ratio of 2.10. The company has seen an annual average earnings growth of 5.4% over the past 10 years.
GuruFocus rated Dell the business predictability rank of 3-star.
There are currently 24 gurus that maintain positions in Dell despite the battle between Icahn and Dell.