Michael Dell's $1.2 Billion Stock Sale: Strategic Move or Cause for Concern?

Dell's Founder and CEO Unloads $1.2 Billion in Stock: Should Investors Worry? | The Motley Fool

The company's founder has been selling billions of stock of the AI server-maker all year. It's always an interesting time when a notable shareholder or executive at a major company buys or sells a lot of stock. Unfortunately for Dell Technologies (DELL 0.27%) shareholders, founder, chairman, and CEO Michael Dell disclosed a massive share sale on Monday. Dell had been thought of as a recent AI winner, and a relatively low-valued one at that. The stock, while up 57% on the year, is still more than 33% below its all-time highs set back in May. So, it's a strange time for the founder to be selling a lot of stock. But do investors really have reason to worry? On Monday, Dell disclosed that founder and CEO Michael Dell sold 10 million shares at an average price of $122.40 during September, good for a whopping $1.22 billion. Furthermore, this recent sale was only part of Dell's overall unloading of Dell shares this year. Through June, Michael Dell had already sold some $2.12 billion of stock at prices in the $130s. Overall, he's sold a whopping 23 million or so shares in 2024. So, this recent $1.22 billion sale just seems like a continuation, albeit at somewhat lower prices. Curiously, Dell didn't sell any stock when shares rocketed to a high of $179 in May, but that may have been due to trading rules around the time of the company's May earnings release. Dell's shares are much higher than they have been over the past few years, thanks to enthusiasm over the company's prospects in artificial intelligence servers. Still, it's not expensive compared with other stocks, especially those perceived as AI winners. Shares trade at just 20.8 times trailing earnings but just 14.4 times earnings expectations for Dell's fiscal 2025, which ends at the end of January. 14 times earnings doesn't seem like a high price, especially for a company geared toward the AI revolution. And based on fiscal 2026 estimates, which ends January of 2026, Dell trades at only 12 times 2026 expectations today. Wall Street doesn't seem to think shares are expensive, either. 17 of the 21 sell side analysts covering Dell rate it at least a "Buy," with price targets ranging from $106 to $220 and an average price target of $146. The worst case for shareholders would be if Michael Dell sees risks to those growth expectations analysts don't see. Those risks could take two dimensions: One, the AI infrastructure buildout might not be as big as some think. Or two, competition may be creeping into Dell's AI server business. The "AI buildout coming to an end" thesis doesn't appear to hold water. After all, in a late June interview on CNBC, Dell said he thought the AI buildout was "at the beginning." So, it would be very strange if he were seeing a slowdown while saying that. Other major tech executives also remain quite bullish on AI infrastructure. For its part, Dell saw very rapid 23% sequential growth for its AI servers in the July quarter to $3.2 billion. That annualizes to a growth rate of 129%. While Dell noted its AI server backlog was "only" $3.8 billion, management also noted its pipeline was "several multiples" of the backlog. Now, there have been concerns over gross margins in the AI server space, which has become very competitive. That could limit the ultimate benefit of all this revenue growth. To be sure, Dell's server gross and operating margins fell year over year, with the infrastructure segment's operating margins falling from 12.4% to 11% last quarter. Still, that was an improvement from the prior quarter, when infrastructure operating margins were only 8%. Still, AI server margins are worth monitoring going forward. For shareholders, the best possible reason for the sales would be if Michael Dell were selling for personal reasons or tax reasons. The tax issue looms, as capital gains tax rates may go up under a new administration next year. Furthermore, some of the tax cuts from the 2017 Tax Cuts and Jobs Act are set to expire in 2025. The uncertainty around corporate tax rates, which could affect Dell's bottom line, as well as potential capital gains tax increases, may have spurred Michael Dell's recent sales. We have recently seen other long-term shareholders and founders cash in big gains this year. Warren Buffett himself has sold massive portions of his largest stock holdings Apple and Bank of America, citing potential tax increases as a reason. Meanwhile, his insurance deputy, Berkshire Hathaway Vice Chairman Ajit Jain just unloaded $139 million of Berkshire stock -- over half his stake in the company. When asked about his share sales in June, Dell replied he sells shares occasionally and continues to be an "enthusiastic" long-term shareholder. And this is true. As of May, Michael Dell owned a whopping 330 million shares of Dell stock, divvied up between Class A and Class C shares. Dell's Class A shares aren't traded, but carry greater voting power than publicly traded C shares. In that light, Dell's sale of some 23 million or so shares this year isn't that much, only amounting to roughly 7% of his entire holdings. Given the stock's run this year and potential higher taxes on corporations or capital gains next year, it's not worrisome to see the company's founder trimming his stake by a single-digit amount -- even if that amounts to billions of dollars.

Dell CEO Michael S. Dell sells shares worth over $1.2 billion By Investing.com

Michael S. Dell, the Chief Executive Officer of Dell Technologies Inc. (NYSE:DELL), has recently sold a significant portion of his holdings in the company. On September 26, 2024, Mr. Dell sold 10,000,000 shares of Class C Common Stock at a price of $122.4 per share, resulting in a total transaction value exceeding $1.2 billion. This sale is notable not only for its size but also because it represents a substantial portion of Mr. Dell's holdings in the company. Following the transaction, he continues to own 16,912,241 shares of Dell Technologies' Class C Common Stock. The sale was executed directly by Mr. Dell, indicating his personal decision to reduce his position in the company at the stated price. Additionally, there are indirect holdings associated with Mr. Dell, specifically 1,380,000 shares owned by the Susan Lieberman Dell Separate Property Trust. It is important to note that Mr. Dell disclaims beneficial ownership of these securities, as stated in the footnotes of the SEC filing. The disclaimer emphasizes that the filing does not admit that he is the beneficial owner of these securities for the purposes of the Securities Exchange Act of 1934 or any other purpose. Investors and market watchers often scrutinize insider transactions such as these for insights into executive sentiment and potential future performance of the company's stock. However, it's crucial to remember that such transactions can be motivated by a variety of personal financial planning considerations and do not necessarily reflect a change in the executive's outlook on the company's future. The transaction was publicly disclosed in accordance with SEC regulations, providing transparency for investors and the market. Mr. Dell's remaining ownership stake in Dell Technologies Inc. ensures that he continues to have significant skin in the game with respect to the company's performance and future. In other recent news, Dell Technologies has been making significant strides in its operations and financial performance. The company reported strong cash flow generation, returning $9 billion to shareholders since initiating its capital allocation program in fiscal year 2023. Dell has also seen significant growth in its core businesses, with its Client Solutions Group and Infrastructure Solutions Group reporting growth of 12% and 38% respectively. Moreover, Dell is expanding its presence in the AI market, with a current $3.8 billion backlog. In a significant move, Dell has mandated a full office work week for its global sales team, aiming to foster a more collaborative environment and enhance skill development. Dell has also launched AI for Telecom, an initiative aimed at assisting communications service providers in deploying AI technologies more efficiently. Analysts from Mizuho initiated coverage on Dell with an Outperform rating, citing the company's diverse portfolio and robust free cash flow. However, Susquehanna issued a Neutral rating, expressing concerns about the uncertain economic returns of AI hardware and Dell's strategy for scaling its AI services. Evercore ISI maintained a positive outlook, reiterating an Outperform rating despite expected gross margin headwinds from a greater mix of AI servers and inflationary component costs. These are the recent developments regarding Dell Technologies. To provide additional context to Michael Dell's recent stock sale, let's examine some key financial metrics and insights from InvestingPro. Dell Technologies Inc. (NYSE:DELL) currently boasts a market capitalization of $83.1 billion, reflecting its significant presence in the Technology Hardware, Storage & Peripherals industry. The company's P/E ratio stands at 21.12, which is relatively modest considering its market position and growth prospects. InvestingPro Tips highlight that Dell's management has been aggressively buying back shares, which could be seen as a vote of confidence in the company's value. This share repurchase program, combined with Dell's dividend policy, contributes to a high shareholder yield. In fact, Dell has raised its dividend for three consecutive years, demonstrating a commitment to returning value to shareholders. The company's financial health appears robust, with InvestingPro Data showing a revenue of $91.84 billion over the last twelve months. Despite a slight revenue decline of 1.9% over this period, Dell managed to achieve a 9.12% quarterly revenue growth in the most recent quarter, indicating a potential turnaround in sales performance. Dell's profitability metrics are also noteworthy. With a gross profit of $20.7 billion and an operating income of $5.895 billion over the last twelve months, the company maintains a solid financial foundation. The operating income margin of 6.42% suggests efficient management of operational costs. It's worth noting that while Michael Dell has reduced his stake, InvestingPro Tips indicate that Dell is trading at a low P/E ratio relative to its near-term earnings growth potential. This could suggest that the stock may still be undervalued despite the recent insider sale. For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for Dell Technologies, providing a deeper understanding of the company's financial position and market outlook.

Michael Dell Sells $1.2 Billion Worth Of Dell Stock, Reducing Stake Amid Company's Recent S&P 500 Relisting And AI Expansion - Dell Technologies (NYSE:DELL)

Michael Dell, the CEO of Dell Technologies Inc. DELL, has offloaded a significant portion of his shares in the company. What Happened: According to a filing with the U.S. Securities and Exchange Commission on Thursday, Dell sold 10 million shares of Class C Common Stock at an average price of $122.4 per share. This transaction amounts to a total value of over $1.2 billion. The sale was executed directly by Dell, reducing his holdings in the company to 16,912,241 shares. See Also: Trump Wants US To Be Bitcoin Mining Capital Of The World -- Core Scientific's Move To Buy Chips From Jack Dorsey Just The First Step In That Direction? CEO Gives Us His Take Why It Matters: This significant sale comes on the heels of several notable events involving Michael Dell and Dell Technologies. Last week, Dell was relisted on the S&P 500 Index In June, Dell expressed interest in Bitcoin BTC/USD, retweeting a message from Bitcoin advocate Michael Saylor, which sparked discussions about digital scarcity. Additionally, Dell has been vocal about the rapid advancement of generative artificial intelligence, comparing its swift rise to the early days of the internet. He highlighted that AI's adoption is happening at a pace much faster than previous technological waves. In August, Jim Cramer called the bottom on Dell Technologies' stock, emphasizing the company's strong relationship with NVIDIA Corp NVDA and suggesting that the stock should be bought at that time. Most recently, in September, a new analyst coverage began on a bullish note, reflecting positive sentiment around Dell Technologies. Price Action: Dell Technologies Inc. stock closed at $118.54 on Monday, down 1.40% for the day. In after-hours trading, the stock dipped further by 0.33%. Year to date, Dell's stock has surged by 58.50%, according to data from Benzinga Pro. Read Next: Elon Musk's Not-So-Long-Ago Prediction Of A 1929 Market Crash Falls Flat As S&P 500 Soars 50%, Defying Tesla CEO's Gloomy Outlook Image via Flickr Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Market News and Data brought to you by Benzinga APIs