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Dell agrees to pay $1bn settlement to VMware and others

By Jenal Mehta

11:51, 17 November 2022

Dell technologies event
Dell settles a messy share conversion case involving VMware and Goldman Sachs. Photo - Getty Images

American technology company Dell (DELL) has settled a claim for $1bn, one of the largest in history.

Its shareholders, which includes VMware (VMW), claimed that Dell failed to adhere to its fiduciary duties in connection to the purchase of EMC for $67bn back in 2016.

The settlement covers claims against Goldman Sachs (GS) which were part of the advisory team during the take-over.

Dell's shares do not appear to have been especially affected by this news, its value lowered 2.76% since the breaking of the settlement. Rival Intel (INTC) dropped by 3.5% and S&P 500 (US500) is down by 0.85%.

S&P 500 (US500) Price Chart

The class action lawsuit which was initially filed in 2018 on behalf of the shareholders, accused Michael Dell and other shareholders of converting $23.9 bn worth of the company stock into tracking shares for a below-market value.

The shareholders say they were short-changed $6bn or possibly more, when Class C common stock was converted to Class V shares in order to finance the acquisition of EMC.

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The judge in the case found enough evidence to support a “reasonable inference that several recognised forms of coercion were in play” and added that only one would have in fact been sufficient.

The settlement offered by Dell is yet to be approved by the court, in a filing to the SEC Dell said “"If the Court does not grant final approval of the settlement and all of its material terms, or the settlement does not otherwise become final or effective, proceedings in the action will continue"

Quinn Emanuel, who led the plaintiffs legal team said in a statement "Today is a great day for Dell shareholders. This settlement underscores a landmark victory, as one of the largest cash settlements in Delaware Chancery Court history on behalf of shareholders. We were ready to bring this case to trial next month and are confident that our strong pre-trial position helped secure this historic settlement for the class”

Another legal team member for the plaintiffs, Chad Johnson of Robbins Geller Rudman & Dowd LLP said “"The magnitude of this result means that a lot of corporate boards are going to sit up straight and pay attention to the lessons learned here," "We are very proud of this result and if approved by the Court, this settlement will set an important bar for fairness to shareholders going forward."

If approved, this settlement will end the trial proceedings and will be reflected in Dell’s upcoming earning report, due to be published in the coming week.

Markets in this article

DELL
Dell Technologies Inc.
125.87 USD
0.1 +0.080%
GS
Goldman Sachs
485.02 USD
-1.17 -0.240%
INTC
Intel Corp (Extended Hours)
33.09 USD
-1.97 -5.640%
US500
US 500
5507.2 USD
-45.3 -0.820%
VMW
VMware
142.17 USD
-4.25 -2.910%

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