The news at a glance
Dell goes private in leveraged buyout; Dow Jones closes above 14,000; Student debt and delinquency rise; Regulators still stumped over Dreamliner; Nasdaq faces fines over Facebook IPO
Tech: Dell goes private in leveraged buyoutMichael Dell, the founder and CEO of Dell Computers, has struck a deal to take his company private for $24.4 billion—the largest leveraged buyout since the financial crisis, said Poornima Gupta and Nadia Damouni in Reuters.com. The deal, which requires shareholder approval, would end the PC manufacturer’s 24-year presence on public markets so it could revive its struggling fortunes “without Wall Street scrutiny.” The deal will be financed with cash from private equity firm Silver Lake, a $2 billion loan from Microsoft, debt financing from several banks, and the assets of Michael Dell, who founded the company in his college dorm in 1984.
The decision to go private “is a bold move out of Wall Street’s harsh spotlight,” said Michael J. de la Merced and Quentin Hardy in The New York Times. But it’s also a huge gamble that will saddle Dell with $15 billion of new debt. “I believe that we are better served with partners who will provide long-term support to help Dell innovate and accelerate the company’s transformation strategy,” Dell said in a memo to employees. Analysts said a privately held Dell might be “more nimble,” but would need to come up with new and innovative products to weather difficult market conditions and stiff competition.
Stocks: Dow Jones closes above 14,000For the first time since October 2007, the Dow Jones industrial average last week closed at over 14,000, said Adam Shell in USA Today. The milestone was a big deal for Wall Street traders, who walked away with a renewed sense of optimism that the U.S. and world economies are recovering. Some analysts even suggested that the Dow could top its all-time high of 14,164.53 to hit a new peak—Dow 15,000. “The Dow provides historical touchstones,” said Jamie Farmer, managing director at S&P Dow Jones Indices. “The 14,000 number has a reference quality to it and has enormous value in itself.”
Loans: Student debt and delinquency riseThe student loan crisis keeps getting worse, said Martha C. White in Time. Credit bureau TransUnion reported last week that the average student loan debt has risen 30 percent, to $23,829, in the last five years. Delinquencies have also risen in the same period, by 22 percent, even though more than half of student loan accounts are currently being deferred. Once those deferrals expire, “the number of people who can’t afford to pay back that money may be almost twice as high.”
Airlines: Regulators still stumped over DreamlinerInvestigators are still puzzled over problems with Boeing’s Dreamliner, said Jeff Plungis in Bloomberg.com. The plane manufacturer has asked the Federal Aviation Administration for permission to begin running test flights to help solve the mystery over what caused batteries to burn aboard Boeing’s newest jet. The probes began last month, when a lithium-ion battery aboard a 787 Dreamliner caught fire on a Boston airport runway. Another Dreamliner made an emergency landing in Japan nine days later, prompting a swift global grounding. NTSB Chairman Deborah Hersman has said answers are likely “weeks away.”
Markets: Nasdaq faces fines over Facebook IPONasdaq may face hefty fines for botching Facebook’s initial public offering last year, said Jenny Strasburg and Jean Eaglesham in The Wall Street Journal. The stock exchange is reportedly in talks with the Securities and Exchange Commission over a settlement that would include a $5 million penalty and has offered to compensate customers $62 million for losses. Technical glitches in Nasdaq’s systems stalled trading for half an hour and caused widespread confusion among brokers on May 18, the day of Facebook’s hotly anticipated IPO.