I have some VMware stock. The purchase agreement says - "Under the terms of the agreement, which has been unanimously approved by the boards of directors of both companies, VMware shareholders will elect to receive either $142.50 in cash or 0.2520 shares of Broadcom common stock for each VMware share. The shareholder election will be subject to proration, resulting in approximately 50% of VMware's shares being exchanged for cash consideration and 50% being exchanged for Broadcom common stock." Can somebody help me understand what this means? Does this mean 50% of my shares will receive cash, but the remaining 50% will be converted to Broadcom stock? Or can I in anyway elect to only receive cash for all my VMware shares? I don't want to exchange it for Broadcom stock. If I can't choose to receive all cash, I am considering selling my VMW shares early. If I can, I'll wait for the acquisition to close (hopefully it will) TC: 300k #VMW #AVGO
you can specify what you want, and they will factor it into the overall deal composition. they have final decision on who gets cash and who gets fractional shares. the whole deal is an50/50 split. not individual investors. that’s why they stopped the ESPP program for VMware employees. it adds more shares and they would have to purchase more in either cash or stock. you have to decide what’s best for you and roll the dice that they will try to honor your choice. but don’t count on them doing so.
This is how it worked during AVGO acquisition of Broadcom. They want to target 50/50 overall and not for individual investor. Most ppl preferred all stock exchange, so ppl who opted for 100% cash got the deal.
During the avago/Broadcom merger, the stock exchange was considered a taxable event. (Maybe bcos AVGO was a Singapore company? 🤔)So there may not be a tax advantage to choose stock over cash. Please check with your management if this is the case in this deal also
The stock exchange is not taxable. The cash portion is. Your new avgo stock will inherit the cost basis of the vmw stock it was converted from.
That’s good to know. We got screwed during our merger, bcos it was not the case.
Sure you can pick whatever you want. Everyone will end up at 50/50 though since all rational investors will choose 100% of whichever option is worth more.
Can i buy now in any trading account like robinhood and choose to get .0252 of avgo stock for each vmware stock?
You can buy anywhere anytime. But you won't be able to make an election until the deal is approved and shareholders are notified of the election. Then you can choose whatever you want. But as noted all over the place you'll get somewhere close to 50/50 cash/stock regardless of what you choose. 50/50 is fixed in the deal terms. Anyone with a brain will pick 100% of the more valuable option (avgo stock right now). So everyone will be pro rata down to 50/50.
Are they giving you “restricted units” at Cayman Islands with a lock-in of 2 years ? If yes, do take that and wait patiently. Else take stock. Don’t take cash.
Tax considerations are important
Better to exchange with AVGO stock, at it's trading 800+, which will give you 200+ for a VMW stock instead of $142 each VMW
Interesting, thanks! But if I were to sell AVGO as soon as it gets converted, do you know if it will count as short term gains? all cash may mean long-term gains for me since I've held the stock for several years.
Yes I believe it will be Short term if you sell AVGO immediately after acquiring. Somebody else can correct if wrong. Why don't you hold it another year and sell it at higher profits...