From the New Economy thread:
VMware: A Thin Stock Getting Thinner
by Eric Savitz
Fidelity Investments have been loading up on VMware (VMW) in aggressive fashion, no doubt providing some significant fuel to the recent astounding run.
In a SEC filing last week, Fidelity disclosed that it holds 8,955,425 VMW shares, or about 11.184% of its Class A shares. But that percentage is hugely misleading, in two directions.
For one thing, it only reflects the Class A shares, and not the 300 million Class B shares held by EMC (EMC), which has an 86% stake in the company, and 98% voting control. But more importantly, Fidelity’s stake represents a much higher percentage of the free-trading shares.
EMC, according to regulatory filings, owns 26.5 million class A shares. Prior to the IPO, Intel (INTC) bought 9.5 million Class A shares at $23, and Cisco (CSCO) bought 6 million shares at $25 (Intel is sitting on a profit of $775 million on its investment, and Cisco has made $478 million on its stake, by the way). But none of those shares is trading. What’s trading are the 37,950,000 shares issued in the IPO. So Fidelity, in short, has snared 23.6% of the float.
One other tidbit. According to the NYSE, short interest in VMW at Sept. 28 stood at 5,636,323 shares, which is 14.9% of the float; back out the Fidelity stake and the total jumps to 19% of the float. Ergo, you’ve got a thin stock getting thinner, with a relatively huge short interest position. It’s a recipe for volatility, and a stock trading at an astounding valuation.
The filing notes that 4.57 million shares of its stake are held by Fidelity Growth Fund |
