Software company Pivotal could be subject to an initial public offering (IPO) in early 2016, according to web site Recode, which claims to quote sources at parent company EMC involved in planning the launch. The IPO is being pushed forward to take place before the Dell acquisition of EMC goes ahead next year, with the anticipated billions raised to be used to service debt.
Big data analysis specialist Pivotal made $227 million in revenue in 2014 but posted a $106 million operating loss on revenue of $118 million for the first half of 2015, according EMC’s filed reports.
Pivotal’s joint owners, EMC and GE, are to offer a minority stake in the software company to public shareholders, says the report. This would be a repeat of a tactic previously used by EMC when it sold 19% of its shares in VMware in an IPO on the New York Stock Exchange in 2007. Sources expect EMC is planning to sell around 20% of its Pivotal shares but retain the rest.
The plan involves Pivotal filing for its IPO confidentially under the auspices of the US Jumpstart Our Business Startups Act, with the IPO concluded before the proposed $67 billion acquisition of EMC by computing giant Dell.
Both EMC CEO Joe Tucci and Dell CEO Michael Dell have supported the idea for a Pivotal IPO in the past. Speculators say the IPO may have been expedited because it would help to pay off some of the estimated $50 billion debt that Dell will have once the EMC takeover closes. A successful Pivotal IPO could potentially raise billions in new capital.
Meanwhile new capital from the Pivotal IPO would supplement some of the funding lost by the decline in VMware shares since the Dell-EMC deal was announced. In August, VMware shares were around $90 each but since the Dell-EMC deal was announced, their price has fallen by a third to $60.15.
Spokespeople for Dell, EMC and Silver Lake, the private equity firm that co-owns Dell, declined to comment.