Dell
5:53 pm
Fri February 22, 2013

Why is Dell Stock Rising?

Shares of Dell stock closed today at $13.92.

That’s 27 cents per share higher than the price Michael Dell and his co-investors have offered, in their efforts to purchase the computer and IT services company. Why would anyone pay more for the stock than Dell has offered?

Ehud Ronn is a finance professor at UT’s McCombs School of Business, and an expert in securities markets. Ronn says different investors are making three different kinds of bets on what will happen to the buyout.

"One is that all the offers will collapse and the price will revert to what it was before the current offer was made," he says."Secondly, that the current offer will go through without any price changes, and finally an offer coming in at a higher vlaue than the one that's currently outstanding."

The stock's market price is an amalgam of investors' strategies and beliefs about the worth of the company and the likelihood that the current deal will close.   Ronn says "when the real money is at play, people have an incentive to do diligent research."

There have been no reports of other bidders on the company.  Two of the company’s largest shareholders, Southeastern Asset Management and T. Rowe Price, have complained that management’s offer price is too low.  

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