VMware investors are facing a critical decision as the deadline looms. Broadcom's planned acquisition of the software company for over $75 billion is at hand, and shareholders have until 5 p.m. Eastern time on Monday to choose between cash and stock options.
The Value Dilemma
This choice holds significant weight due to the substantial difference in value between the two options. Shareholders who do not make an election will likely receive all cash. However, those who opt for stock stand to gain significantly more.
Election Deadline Details
A joint press release by VMware and Broadcom highlighted the Monday deadline for VMware shareholders, but it also indicated that individuals holding shares through a bank or broker may face an earlier election deadline.
For retail investors at Schwab, the deadline has already passed, as the firm cut off elections by close of business on Friday. At Fidelity, requests will be handled on a best-efforts basis exclusively on Monday.
The stock option, with a value of approximately $215 (equivalent to 0.252 shares of Broadcom per VMware share), surpasses the cash option valued at $142.50. This significant discrepancy reflects the substantial rise in Broadcom stock (AVGO) since the merger deal was announced in May 2022.
Broadcom has effectively capped the stock portion at 50% of outstanding VMware shares. Consequently, based on an assumed 50/50 mix of stock and cash, the current estimated value of the deal stands at around $179 per share.
Make your choice wisely, as the deadline approaches swiftly.
Wall Street Questions Surrounding VMware's Deal with China
Based on an assessment made by _, the chances of the deal closing successfully currently stand at approximately 50%. If the deal is finalized, VMware stock could potentially experience a significant increase of nearly $30 per share. Conversely, if the deal falls through, there is a projected downside of approximately $30 per share.
In response to these concerns, VMW has reiterated its confidence in the deal. A spokesperson for the company stated, "We remain optimistic that the deal will be concluded by October 30, 2023."
Despite repeated attempts, a representative from Broadcom has not provided a comment at this time.
As time progresses, it will be intriguing to observe how the stock market reacts to VMware's situation. There is a possibility that the stock price could drop to around $142.50. With the election deadline having passed, investors may only be entitled to the cash value of the deal, which amounts to $142.50.
As of Friday, VMware shares were valued at $150.91, while Broadcom observed a decline of 1.6% at $853.63.