Following its acquisition by Broadcom, VMware stock ceased to exist as an independent entity. Former VMware shareholders received a predetermined package of Broadcom stock and cash in exchange for their VMware shares.
The Outcome of the Broadcom-VMware Acquisition
The acquisition of VMware by Broadcom, a significant event in the technology sector, led to the delisting of VMware's common stock. This means that VMware shares are no longer traded independently on stock exchanges. Instead, the value of former VMware holdings is now tied to Broadcom's performance, as shareholders primarily received Broadcom stock as part of the merger consideration.
Shareholder Election Options and Results
During the merger election period, VMware shareholders were presented with two primary options for their shares:
- Stock Election: Receive 0.252 shares of Broadcom common stock for each VMware share they owned.
- Cash Election: Receive $142.50 in cash for each VMware share they owned.
The overwhelming majority of VMware holders opted for the stock election. Approximately 96% of VMware shareholders chose to receive Broadcom stock. Despite electing stock, these shareholders ultimately received a package that included both Broadcom stock and cash. This package was estimated by Barron's to be worth about $197 per VMware share. This outcome suggests that even for those who elected stock, the final consideration included a cash component, likely due to the deal's structure or proration mechanisms to balance the mix of stock and cash distributed by Broadcom.
Below is a summary of the options and general outcome:
| Election Type | Per VMware Share Entitlement | Result for Shareholders (Approximate) |
|---|---|---|
| Stock | 0.252 Broadcom shares | Package of Broadcom stock + cash |
| Cash | $142.50 cash | Cash consideration |
What This Means for Former VMware Stockholders
For individuals who previously held VMware stock, the acquisition fundamentally changed their investment:
- Shift in Holdings: Former VMware shareholders now primarily hold Broadcom common stock. This means their investment profile has shifted from a company solely focused on virtualization and cloud software to a more diversified entity that also includes semiconductors and enterprise software solutions.
- Realization of Value: The merger provided a significant realization event for VMware shareholders, with the final package delivering a notable value per share, as estimated by financial publications.
- Integration Risk and Opportunity: Former VMware shareholders are now exposed to the integration risks and potential synergies of the combined Broadcom-VMware entity. The future performance of their investment will depend on Broadcom's ability to successfully integrate VMware's operations, products, and customer base.
In essence, VMware stock, as a standalone investment, no longer exists. Its value has been transformed into Broadcom shares and a cash component, making former VMware shareholders investors in the larger Broadcom enterprise.
