The ultimate winner in the Dell sweepstakes

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The battle for Dell is getting very interesting.

For the moment, it appears to be a Michael Dell vs. shareholders battle, with the shareholders being led in part by Carl Icahn, who thinks each share in the company is worth $9 more than the current LBO offer.

But there's a possibility that the big winner will be the short sellers. It would appear to be a risky bet to short a stock that appears to be in the throes of some sort of bidding war, but that is exactly what esteemed short-seller Jim Chanos has done.

He tells CNBC that, "We are short Dell. We covered our [previous] Dell short in single digits last year. And we shorted it [again in 2013] into the deal."  As for those who are long the stock, "I don't think they're looking at the numbers."

In his view, both the balance sheet and the income statement at Dell reflect massive challenges that will eventually tank the stock. As for the balance sheet, at the end of January, "Dell had positive working capital plus receivables and long-term investments of about $8 billion. They had long-term liabilities of $13 billion. So it's a negative number before we get to the equity."

And as for the income statement, "The business [at Dell] is not doing well at all. The cash flow is plummeting," he said on CNBC.

It's unclear at what price he opened his short position. But it would appear that the downside is limited right now. There is an offer on the table after all, and if angry shareholders have their way, the price is only going to go higher.

The only way the stock would tank is if deal on the table, offed by Dell himself and Silverlake, and other deals were scotched as well. It's hard to see that happening. At this point, it looks like current LBO offer may be the floor.

Then again, Chanos may know something others don't.

For more:
- here's the article

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Carl Icahn may shake up Dell's LBO plans
 

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