© Reuters.
The delay in Broadcom (NASDAQ:)’s $70 billion merger with VMware (NYSE:) has caused a 3% increase in VMware’s stock to $146.62 on Monday, surpassing the deal’s value of $142.50 per share. This surge suggests a short squeeze due to VMware’s thin float of 4% or less of its roughly 432 million shares, making the stock more susceptible to price volatility. Broadcom’s stock also saw a slight uptick of 0.3% on Monday.
Approximately 96% of VMware shareholders have elected to receive Broadcom stock as part of the merger deal. These shares are now locked until the deal either concludes or fails, which is expected to happen soon, before the termination date on November 26.
This delay has stirred concerns about potential impacts from escalating U.S.-China relations, with many investors finding China’s future actions unpredictable. Broadcom CEO Hock Tan, however, attributes the delay to bureaucratic issues, contradicting a report by the Financial Times that suggests political reasons are at play.
The election period for VMware shareholders ended on October 23. Current buyers of VMware stock are set to receive $142.50 in cash per share. Those who opted for Broadcom stock will receive a package of stock and cash estimated by Barron’s at about $178 per share, subject to proration since Broadcom capped the stock election at 50% of the merger consideration.
Experts have warned that the lock-up of shares could potentially cause redemption issues for investors.
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