Charles Sizemore gave his thoughts Erika Morphy of the E-Commerce Times on the shareholder revolt that is threatening to de-rail the leveraged buyout of Dell (NYSE:DELL) by a group led by founder Michael Dell:

These investors have valid points as they make their case against the LBO, said Charles Sizemore, manager of the Dividend Growth and Tactical ETF models at Covestor.

“Applying a P/E ratio of just 12 would get you a stock price of nearly $18. Applying a price/sales ratio of just 1 would get you to $33 per share,” he told the E-Commerce Times. “Even though Dell’s offer to pay what amounted to a 25 percent premium over the pre-announcement market price, there is a case to be made that it is far too low.”

Indeed, if Michael Dell raises his price, Dell would presumably have to take on more debt to make the deal happen, Covestor’s Sizemore said. “Having too high a debt load is risky for a company in a fast-changing sector like tech.”

What Dell can do to bring these shareholders on board with the plan is unclear.

Dell could change the terms and raise the price above the $13.65 that’s on the table, suggested Barry Randall, who runs the Crabtree Technology Model for Covestor.

It could include a one-time dividend payment to current, pre-private investors, he added.

Dell could also remind investors that the share price had been languishing and that the market had largely given up on the stock, Sizemore said.

Dell is worth more than what was offered, but the bottom line is that a company is only “worth” what someone is willing to pay for it, Sizemore maintained.

To read the full article, follow this link.