8-KLeadership ChangesMaterial AgreementsSecurities & Listing+5

Dell Technologies Inc. 8-K Report, Material Agreement (Dec 28, 2018)

Filed December 28, 2018For Securities:DELL

Summary

This 8-K filing from Dell Technologies Inc. (DELL) on December 28, 2018, details the closing of the 'Class V transaction,' a significant corporate restructuring. The core of this transaction involved the conversion of Class V common stock into either cash or Class C common stock. Investors should note that due to overwhelming cash elections by Class V stockholders, a proration factor was applied, meaning many Class V stockholders received a combination of cash and Class C stock instead of their preferred all-cash option. The filing also outlines extensive changes to various stockholders' agreements and corporate governance. Key stakeholders like Michael Dell (MD stockholders), MSD Partners, and Silver Lake Partners (SLP stockholders) have new agreements governing director nominations, board composition, and transfer restrictions on their holdings. The termination of the prior Sponsor Stockholders Agreement and the implementation of new, detailed agreements mark a shift in the control and governance structure of Dell Technologies, impacting board representation and strategic decision-making.

Key Highlights

  • 1Completion of the 'Class V transaction' on December 28, 2018, where Class V common stock was converted into cash or Class C common stock.
  • 2Due to exceeding the $14 billion cash cap, a proration factor of approximately 0.6414 was applied, forcing many Class V stockholders to receive a mix of cash and Class C stock.
  • 3Termination of the previous Sponsor Stockholders Agreement and establishment of new, detailed Stockholders Agreements with key investors: MD stockholders, MSD Partners stockholders, and SLP stockholders.
  • 4Significant changes in corporate governance, including a revised board structure, voting rights for directors, and modified director nomination rights for major stockholders.
  • 5The Class V common stock (DVMT) has ceased trading on the NYSE, while the new Class C common stock (DELL) began trading.
  • 6New 180-day lock-up periods for certain major stockholders (MD, MSD Partners, SLP) on their holdings of Dell Technologies Inc. (DTI) securities following the transaction.
  • 7Amendments to the Registration Rights Agreement and Management Stockholders Agreement, affecting liquidity and transferability of shares for various investor groups.

Frequently Asked Questions

The Class V transaction, completed on December 28, 2018, involved the conversion of each outstanding share of Class V common stock into either $120.00 cash (subject to a $14 billion cap) or 1.8066 shares of Class C common stock. Due to high demand for cash exceeding the cap, most Class V stockholders received a combination of cash and Class C stock, with cash being prorated. This transaction effectively ended the separate trading of Class V stock and introduced new Class C stock.

The transaction significantly altered Dell's corporate governance. The board of directors is now divided into two classes, with directors elected annually by all common stock classes voting together. Individual voting power for each director on the board has been standardized to one vote per director, replacing the previous weighted voting system. Major stockholders (MD, MSD Partners, SLP) have new agreements defining their rights to nominate directors and influence board composition, though these rights are subject to ownership thresholds and specific terms.

The new Stockholders Agreements establish detailed rules for significant shareholders, including Michael Dell, MSD Partners, and Silver Lake. These agreements govern director nominations, board committee representation, and importantly, impose 180-day lock-up periods restricting the sale of Dell Technologies Inc. (DTI) securities for these parties. They also outline tag-along rights and responsibilities, influencing future strategic moves and potential share transfers by these major investors.

The Class V common stock (DVMT) ceased trading on the NYSE on December 28, 2018, as it was delisted following the completion of the Class V transaction. In its place, Dell Technologies issued Class C common stock (DELL), which began trading on the NYSE on a regular-way basis starting December 28, 2018. The number of outstanding Class C shares is detailed in the filing.