Dell Article

In: Business and Management

Submitted By ericstru
Words 547
Pages 3
Yesterday’s big news was that Dell is thinking of moving from a public traded company to a private company. I found this article on Yahoo Finance and Chris Nichols wrote it on January 18th. As I prepared for interviews in the states the weeks prior to coming to Copenhagen each and everyday I needed to know what was going on in the stock market for potential questions on rising and falling companies. I grew very interested in the markets, which is why this particular article intrigued my eye.
The article goes into depth about what Dell faces in becoming a privately held company. The process creates a situation where Dell would have to buy back all of its stock from stockholders at a price higher than fair market price. Businesses usually do this to gain more day-to-day control of their company and make decisions solely based on the company and not to please the stockholders. When a company makes this decision usually the hardest part is to fairly price the stock so those who own share in the company make money for the risk they took. The article goes into depth on the methods of how businesses go about this process. One way to evaluate the stock would be to compare Dell to comparable companies in the same industry. This usually provides a solid benchmark to what the stock price should be but isn’t always 100% accurate. Dell pulls in revenues of 60 billion dollars a year so when pricing its stock a more detailed analysis needs to be taken into account. The article mainly focuses on the method of discounted cash flow. DCF isn’t perfect but it does take into account many factors and scenarios the company could very well face in the future. After discussing all the different numbers used to create the DCF model, Yahoo Finance determined that the stock price should be fairly set at $13.61 per share. This price was in between the reported deal that was leaked…...

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