Dell Technologies Offers $1 Billion To Settle Shareholder Lawsuit

Shareholders of Dell Technologies prior to its December 2018 re-launch on to the publicly traded markets had sued Michael Dell and other board members in Delaware accusing them of undervaluing the company by ‘billions of dollars.’

Dell Technologies said Wednesday that it will pay $1 billion to settle a court case accusing CEO Michael Dell and other board members of underestimating the value of the company by “billions of dollars” when it was launched again as a public company in 2018.

Dell announced the news in a U.S. Securities and Exchange Commission filing saying the parties in the Delaware Chancery Court lawsuit “have agreed to dismissal of all claims upon payment of a total of $1.0 billion,” which includes all costs, expenses and fees of the plaintiff class relating to the action and its resolution, Dell wrote in the filing.

“The plaintiffs generally alleged that the director defendants and the stockholder defendants breached their fiduciary duties under Delaware law to the former holders of the Class V common stock in connection with the Class V transaction by offering a transaction value that was allegedly billions of dollars below fair value,” Dell wrote in the filing.

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Dell said the payout would come from the company itself and possibly its insurers as well since the board members and stockholders who were accused of wrongdoing were indemnified by a special committee of fellow board members.

That committee was comprised of board members who were not named in the suit, and were advised by outside legal counsel, the SEC filing states. The settlement includes a payout on behalf of Goldman Sachs, Dell’s financial advisor when it returned to trading on the public market.

In December 2018, Dell paid $14 billion in cash and issued 149,387,617 shares of its newly listed stock then worth about $2.1 billion to all holders of the outstanding shares of its Class V common stock.

Asked for a statement on the settlement, Dell Technologies said: “We were informed that the parties have reached a settlement agreement. An independent special committee of the board has approved the settlement payment by the company. The settlement remains subject to court approval.”

Dell is the largest PC maker in the world and reached $101 billion in sales in its most recent fiscal year, which by revenue puts it just ahead of some of the best known brands in the world: NTT, Pfizer, ADM, Hyundai and Johnson & Johnson.

Among that group, Dell has the lowest market cap, a reflection of the total value of its publicly traded shares, at $30 billion. The next lowest, Archer-Daniels-Midland Co. has a market cap of $52.2 billion, nearly 73-percent higher, while consumer health and medical industry heavyweight Johnson & Johnson tips the scales at $453.9 billion.