Carl Icahn comes out swinging against Dell's $21.7 billion VMware deal that could see it return to the stock market (DVMT)

Carl Icahn says Dell's offer to buy VMware tracking stock is massively undervalued.
In a letter published Monday, the billionaire activist investor urged announced in increased stake and in the tracking stock and urged other shareholders to say no to the proposed Dell takeover
The deal could see Dell return to public markets after going private in 2013.
Follow VMware's stock price in real-time here.

Two months after disclosing a $535 million investment in both Dell and it's recently acquired tracking stock, VMware, Carl Icahn announced Monday he has upped his stake in the tracking stock to more than 8% — or over $2 billion.

The billionaire activist investor, now VMware's second-largest shareholder, published a scathing letter bashing the proposed $21.7 billion buyout by Dell that could make the computer giant publicly traded once again.

"While we have unearthed many undervalued opportunities in the past, very few companies compare to the current opportunity and the massive undervaluation of DVMT — which exists in plain sight for all to see," Icahn said in the letter published online Monday.

The true value of VMware should be $144, according to Icahn, who maintains the deal in its current form values the company at closer to $94. By his calculations, VMware could generate $12 per share in free cash flow over "a few years," resulting in a value of more than $250 a share. VMware holders shouldn't agree to the deal "unless it contains a very, very substantial increase," Icahn said.

As a tracking stock, VMware's financial information is reported separately from Dell’s private books, but offer holders no equity stake in the subsidiary business unit. Dell plans to buy VMware’s outstanding shares for about $109 per share in cash for DVMT, while valuing Dell's new shares at around $80, according to Bloomberg. VMware holders will receive 1.3665 shares of the new stock for every one they own.

Icahn isn't the only one concerned about the deal.

In February, Morgan Stanley analysts Keith Weiss and Sanjit Singh called it the "worst case scenario" for VMware shareholders. They see VMware being worth $143, roughly in-line with Icahn's measurements.

"Clearly Michael Dell and Silver Lake take us for fools if they think that we would exchange this future value potential for only $94 per share," Icahn said. "I intend to do everything in my power to STOP this proposed DVMT merger."