EMC & VMWare: SEC Filings & Developments Confirming Hot IPO Status (EMC, VMW, INTC)

EMC (EMC) is getting closer and closer getting the VMWare (VMW) spin-off and IPO out the door to Wall Street.  Some interesting developments have happened: Intel (INTC) has taken a $218.5 million stake in the company for approximately 2.5% of the company post-IPO.  VMware indicated Monday that it expects to raise more than $740 million from its IPO after expenses, based upon 33 million Class A shares for between $23 and $25 per share.

Yesterday the company made an SEC filing showing an exchange program for VMWare employees to exchange their employee stock options. In another filing, the internal memo was included and here are some of the guts of it:  As Diane Greene recently announced, VMware and EMC are launching the stock option and restricted stock Exchange Program for eligible VMware employees, effective today, Monday, July 9th, 2007.  The EMC-VMware Exchange Program is a one-time offer for eligible employees to voluntarily exchange EMC Options and Restricted Stock for VMware Options and Restricted Stock respectively. If you are eligible and decide to participate in the Exchange Program, you must make your election(s) before the offer expires at 11:00 a.m. Pacific Time on August 6th, 2007 (unless the offer is extended). 

Needless to say, it is probable that VMWare employees will want to lock in the recent EMC-option gains and convert to the ‘newest hottest IPO’ when they can. Based on the S-4 filing it appears as though 9.225 million options are being filed and some 4.35 million shares of restricted common stock will be issued.  Keep in mind that this is still preliminary and these numbers could be very different by the time the spin-off comes.

Here is what the company is saying about itself and how the classes of stock will be broken down:

VMware Stock has been approved for listing on the New York Stock Exchange under the symbol “VMW.” We are currently a wholly owned subsidiary of EMC and following the IPO and this Offer, EMC will continue to be our controlling stockholder. Following the IPO, we will have two classes of authorized common stock: Class A common stock and Class B common stock. EMC will own 32,500,000 shares of Class A common stock and all 300,000,000 shares of Class B common stock, representing approximately 89% of our total outstanding shares of common stock. The rights of the holders of Class A and Class B common stock are identical, except with respect to voting, the election of directors, conversion, certain actions that require the consent of holders of Class B common stock and other protective provisions as set forth in this Prospectus—Offer to Exchange. The holders of Class B common stock shall be entitled to 10 votes per share and the holders of Class A common stock shall be entitled to one vote per share. Therefore, EMC will hold approximately 99% of the combined voting power of our outstanding common stock upon completion of the IPO and this Offer.

There are still some pending issues, but this one seems to be getting much closer to coming to market.  Here was the preliminary data on EMC-VMWare we issued at the end of last month.  As a reminder, EMC shareholders will not be receiving shares in this spin-off.

Jon C. Ogg
July 10, 2007

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