Investors Claim Michael Dell Is Undervaluing His Own Company

Shareholders believe that Michael Dell, founder of Dell Inc. is undervaluing the company. One shareholder said that the founder’s $24.4 billion offer doesn’t meet the actual value of the company, particularly when you consider Dell’s recent stock buyback program. A complaint has been filed in the federal court in Houston.

Weak Management Causes Dell Shares to Plummet

Michael Dell is blamed for weak management decision making, which has led to what shareholders refer to as significant losses causing the company’s stock price to dwindle. It appears that owner Dell now aims at taking advantage of the company’s position stock price in order to buy it completely.

Dell is believed to be full of potential and earnings are expected to multiply. However, poor decision making has caused shares to plummet, raising suspicions. This is the basis of the complaint filed in the court. Earlier in February, a similar complaint was filed in Delaware Chancery Court for offering to repurchase stock at a discount. It has been doing so for the last two years.

Violation of Legal Bidding Process

Shareholders said that Dell violated fiduciary duty, as it failed to allow competing bids that stood in the way of Michael Dell gaining a “controlling stake in the company and remain CEO.” In other words, there is a deliberate attempt to ensure that Michael Dell gains full control in order to convert Dell into a totally privately held company.

In the process of trying to buy the company out share by share, Michael Dell is undervaluing company shares deliberately. Many see this as a well thought out, engineered scam that’s robbing shareholders of their money and compelling them to sell their shares.

JP Morgan’s Statements on Dell’s Share Pricing and Bids

$2.8 billion in savings partially belongs to Michael Dell, thereby enabling him to keep control of the company for less. Dell on its part argued that JPMorgan Chase & Co. produced a rather gloomy breakdown of the company in a meeting with the board last September. While the bank focused on managers’ shortcomings, they said the company failed to come up to management and consensus analyst quarterly predictions. This meant a possible shift from personal computers to enterprise storage and services for greater company profits.

Shareholders Feel Angered and Disappointed

Additionally, JPMorgan also mentioned the absence of a stated third-party interest in buying the company over the last two years. Further, when touching on the matter of inviting bids, there was “the potential risk of competitive harm” cited.

The reason given was the possibility of leaks in the event of an offer not being made. The information revealed to a party declining to make an offer could create instability among the company’s employees, customers and vendors. Shareholders find these explanations ludicrous and reiterate their complaints. The matter is intensifying with each passing week, and will most likely take the shape of a court battle in time to come.

[Image via zuoda]