Apps & Software

EMC Hints At VMWare IPO Date/Terms/Expectations & Sets Employee Exchange Ratios (EMC, VMW, INTC)

Douglas A. McIntyre

EMC Corp. (NYSE:EMC) has made an SEC Filing for the proposed dates and averages used to calculate employee share and options exchanges from EMC to VMWare (NYSE:VMW) ahead of the IPO.  The final calculated volume-weighted average price of EMC common stock ( “Average VWAP”) from which the resulting exchange ratio between EMC common stock and VMware common stock will be derived, will be determined by averaging (taking the arithmetic mean of) the daily volume-weighted average price of EMC common stock for the final two full trading days of the Exchange Offer period. The final two full trading days of the Offer (unless the Offer is extended) will be August 2, 2007 and August 3, 2007.  We prdicted a ‘second week in August’

date as the likely IPO time back on June 27, which turns out to be pretty accurate.

This SEC filing also showed the ‘hypothetical price’ at $24.00, but keep in mind that is the mid-range and the IPO is deemed to be hot.  EMC shares are also at multi-year highs ahead of earnings and ahead of this IPO.  Shares closed up 1.7% at $19.25 on Thursday and were only $16.69 as of the close on June 13.  Here is the hypothetical grid:

VMW                                           AVERAGE VWAP
IPO               $15          $16           $17           $18           $19          $20
$26            0.5769     0.6154     0.6538     0.6923     0.7308     0.7692
$25            0.6000     0.6400     0.6800     0.7200     0.7600     0.8000
$24            0.6250     0.6667     0.7083     0.7500     0.7917     0.8333
$23            0.6522     0.6957     0.7391     0.7826     0.8261     0.8696
$22            0.6818     0.7273     0.7727     0.8182     0.8636     0.9091

It even gives a formula: EMC AVG. NYSE VWAP $19.085 and $24.00 assumed IPO Price would set a new share exchange ration of 1 EMC shares equals 0.7952 VMWare Shares.  Keep in mind this fluctuates abased on a $24.00 pricing as the VWAP on 7/10 for EMC was $18.66 for 0.7785 shares of VMWare, and on 7/12 the VWAP for EMC was $19.31 for an exchange ratio of 0.7952 shares of VMWare.

Earlier this week we noted how developments were confirming a ‘Hot IPO’ status after the Intel (NASDAQ:INTC) investment.  We’ll be sending out theoretical trading strategies to our subscribers after EMC earnings and ahead of the VMWare IPO.  This one is being dubbed as one of the new hot IPO’s out of hot IPO’s for 2007, so stay tuned.

Jon C. Ogg
July 13, 2007

Jon Ogg can be reached at; he does not own securities in the companies he covers.