Back in 2013, activist investor Carl Icahn sued Dell Technologies Inc. in an ultimately unsuccessful attempt to block Chief Executive Michael Dell (pictured) from taking it private. Now that the enterprise technology giant is looking to return to the stock market, it has once again found itself in Icahn’s sights.

The billionaire investor today issued a 20-page letter strongly criticizing Dell’s $21.7 billion plan to go public.

The company wants to pull off a complicated financial maneuver that would involve buying the tracking stock of subsidiary VMware Inc., which trades under the name DVMT. The move would return Dell to the stock market without requiring it to go through an initial public offering, thus sparing the company the complexities involved in the process.

Icahn argues that the $21.7 billion bid significantly undervalues VMware. The proposed deal would see DVMT shareholders offered either 1.3665 shares of Dell Class C common stock or $109 in cash for each share of tracking stock. In his letter, Icahn wrote that VMware should instead be valued at $300 per share.

The investor said the estimate draws on IBM Corp.’s recent acquisition of Red Hat Inc. for $34 billion.

“We believe that at VMware’s current trading price, the market is under-appreciating VMW’s true earnings power as the uptake and ever-increasing complexity of the cloud-native world will drive sustainable long-term growth,” Icahn wrote. “Based on IBM’s recent offer for Red Hat, a deal we should have a comparable valuation to a future VMware deal, VMW should be worth $300 per share.”

The letter comes ahead of an investor meeting next month that will see DVMT shareholders vote on whether or not to approve the buyout. Icahn hopes to convince Wall Street that the proposed price tag is too low, while Dell has reportedly held talks with large investors about the sweetening the offer.

The company is also putting a contingency plan in place in case investors vote down the offer. Last month, Dell revealed that it has interviewed several banks about organizing a traditional IPO should the need arise. A public offering could enable the company to force DVMT shareholders who are against the buyout to sell their stock.

Icahn indicated that his firm may pursue legal action should Dell go down this route. “Assuming Dell loses the December 11 vote, if Dell were then to attempt an IPO and forced conversion of DVMT shares, certainly causing DVMT shareholders irreparable harm, we believe applicable law will allow shareholders to pursue an injunction and/or substantial damages,” he wrote. 

Icahn is already suing Dell for allegedly failing to divulge enough financial information about its plans to go public. Last month, Icahn revealed that he has acquired an 8.3 percent stake in the DVMT trading stock.

Photo: SiliconANGLE