Broadcom (AVGO) Merger with VMware (VMW) FAQ's

What is the Broadcom–VMware merger?

Answer: The Broadcom–VMware merger refers to Broadcom Inc.’s agreement to acquire VMware, Inc. Broadcom (NASDAQ: AVGO) announced in May 2022 that it would buy VMware in a cash-and-stock deal valued around $61–69 billion. After lengthy regulatory reviews worldwide, the acquisition closed on November 22, 2023. VMware ceased to exist as an independent publicly traded company—VMware’s common stock was delisted from the NYSE upon closing. VMware’s business has since been integrated into Broadcom as a division called “VMware by Broadcom”, reflecting Broadcom’s strategy to expand its enterprise software portfolio. In summary, Broadcom now owns VMware, and former VMware shareholders received compensation in Broadcom stock and/or cash as described below.

I owned VMware shares – what did I receive from the Broadcom acquisition?

Answer: Each share of VMware was converted into either a cash payment or Broadcom stock under the merger terms. Specifically, for each VMware share, Broadcom offered $142.50 in cash or 0.2520 shares of Broadcom (AVGO) common stock. Shareholders had the option (detailed below) to elect cash or stock, but ultimately only 50% of the total VMware shares could be exchanged for cash and 50% for stock (per the merger agreement’s proration rules). This means in aggregate half of VMware’s shares were paid out in cash and half in Broadcom shares. In practical terms, many investors ended up receiving a mix of cash and stock. For example, if you held a number of VMware shares, a portion of those shares likely turned into Broadcom shares and the rest into cash, depending on elections and proration (more on proration below). Any fractional Broadcom share that resulted from the conversion (since 0.2520 AVGO per share could lead to fractions) was paid out in cash instead of issuing fractional stock. So, if you see a small cash credit for something like “fractional share,” that’s because fractional AVGO shares were cashed out. In summary, as a VMware shareholder you now either hold Broadcom stock, cash, or a combination of both in place of your VMware shares.

Did VMware shareholders get to choose between cash or Broadcom stock?

Answer: Yes. As a VMware shareholder, you had the opportunity to elect whether to receive cash or Broadcom stock for your shares (subject to the 50/50 overall limit). An election form was provided to shareholders, and the deadline to submit your choice was 5:00 p.m. Eastern Time on October 23, 2023. You could elect “all cash” ($142.50 per VMware share) or “all stock” (0.2520 shares of AVGO per VMware share). If you made a valid election by the deadline, your VMware shares were converted according to your choice but with an important caveat: because Broadcom capped the total payout at 50% cash and 50% stock, shareholders’ elections were subject to proration. In other words, if too many shareholders chose one option, not everyone would get 100% of their preferred form. (This is exactly what happened – most shareholders preferred stock, triggering the proration mechanism. We explain the outcome in the next question.)

What if I didn’t make an election or missed the deadline?

Answer: If you did not submit a choice by the October 23, 2023 deadline, you were automatically assigned the cash option by default. Broadcom’s merger agreement stipulated that shareholders who failed to elect or whose election form wasn’t received in time would receive the all-cash consideration of $142.50 per VMware share. Approximately 4% of VMware’s outstanding shares fell into this category (either electing cash or making no election) and those shares all received the $142.50 cash payout per share. In practical terms, if you owned VMware stock and did nothing, you should have seen your shares liquidated and the cash proceeds deposited to your brokerage or account after the deal closed. (You would no longer have VMware stock, since it’s been bought out and delisted.)

Why did I receive both Broadcom stock and cash even though I elected all stock?

Answer: This happened because of the proration rule in the merger. Broadcom and VMware agreed that exactly 50% of the VMware shares would be exchanged for cash and 50% for Broadcom stock, in total. Nearly 96% of VMware shares were elected for stock (only ~4% chose cash or made no election). Since far more than half of the shares “wanted” Broadcom stock, the all-stock election was oversubscribed. To honor the 50/50 overall split, Broadcom prorated the stock elections. In effect, each shareholder who elected stock received only about 52.1% of their shares in the form of Broadcom stock, and the remaining ~47.9% of their shares were paid out in cash. This ensured that roughly half of the total merger consideration was paid in stock and half in cash. In simple terms: even if you asked for all stock, you likely got around half your value in Broadcom shares and half in cash (at $142.50 per share) due to the proration adjustment. This is why your account shows a combination of AVGO shares and cash. The exact ratio (approximately 52.1% stock / 47.9% cash for stock-electing investors) was determined by the formula in the merger agreement, and it applied uniformly to all who chose stock. Unfortunately, no one who elected all stock could receive 100% stock – everyone was affected equally by this proration rule.

Is VMware still a separate stock or company after the merger?

Answer: No. After the acquisition, VMware’s common stock stopped trading and was delisted from the New York Stock Exchange. VMware as an independent publicly traded entity ceased to exist on the closing date (November 22, 2023). The company VMware hasn’t vanished – it’s now a wholly-owned division of Broadcom Inc., often referred to as “VMware by Broadcom.” Broadcom has folded VMware’s products and services into its enterprise software portfolio. For example, VMware is continuing to operate under Broadcom’s ownership, focusing on cloud and virtualization solutions as part of Broadcom’s offerings. But if you were a VMware shareholder, you can no longer buy or sell “VMW” shares on the stock market. Your investment has been converted into Broadcom stock or cash as described above. Going forward, any growth (or risks) of VMware’s business will be reflected in Broadcom’s stock. So, in summary: VMware stock is no longer available, and former VMware shareholders now either hold Broadcom stock or have received cash in exchange for their VMware holdings.

What are the tax implications of this merger for VMware shareholders?

Answer: The tax consequences depend on what form of consideration you received (stock, cash, or both). The merger was structured as a tax-free reorganization under U.S. tax code §368 for the stock portion. This means that if you received Broadcom stock in exchange for your VMware shares, that portion is not immediately taxable – you don’t report a gain just for getting the new Broadcom shares. Your tax basis and holding period for the Broadcom shares carry over from your VMware shares (more on cost basis below). However, any cash you received is generally taxable. Cash received in a merger is treated as if you sold that portion of your shares for $142.50 each. It will typically be taxed as a capital gain (long-term or short-term depending on how long you held the VMware shares) on the difference between the cash received and your cost basis in those shares. In other words, the cash portion is taxable in the year of the merger closing, just like a stock sale. This includes cash in lieu of fractional shares – even if you only got a few dollars for a fractional AVGO share, that small cash amount is technically taxable as capital gain income. If you took the all-cash option (or defaulted to cash), you essentially sold all your VMware stock for $142.50 per share, so you’ll need to report any resulting gain or loss on your 2023 tax return. If you received a mix of stock and cash, you’ll be taxed on the cash part only (to the extent it exceeds the basis allocated to those shares – see next question) while the stock part is not taxed immediately. Important: These are general guidelines – individual situations can vary. If your VMware shares were in a tax-deferred account (401k, IRA, etc.), the rules may differ (e.g., no immediate tax in an IRA). And special cases (like employee stock purchase plan shares or incentive stock options) can have additional tax nuances. We strongly recommend consulting a tax professional to correctly report this merger on your taxes. Your broker should issue a Form 1099-B for the cash portion, and Broadcom has provided IRS Form 8937 with details on the tax treatment. A tax advisor can help ensure you handle any capital gains and cost basis adjustments properly.

How do I calculate my cost basis for the new Broadcom shares I received?

Answer: Calculating your cost basis after a cash-and-stock merger can be tricky. In general, your original cost basis in VMware stock is split between the new Broadcom shares you received and the cash you received. Because the stock portion was tax-free, the Broadcom shares inherit the basis from your VMware shares (proportionately). The IRS requires that you allocate your old basis according to the relative fair market values of the stock and cash received. Broadcom’s investor relations provided guidance for this allocation: they reported an $979.50 per share value for Broadcom stock as of the merger’s closing date (this was the average of Broadcom’s high and low trading prices on 11/22/2023). Using that value, you can determine what portion of the merger consideration’s value was stock vs. cash, and allocate your basis accordingly. For example, suppose half of your merger payout (by value) was in Broadcom stock and half in cash – then roughly half of your original basis goes to the new AVGO shares and half to the cash. In reality, the ratio might not be exactly 50/50; you’d use the $979.50 per AVGO share figure to compute the exact percentages. Broadcom’s Form 8937 (available on their investor site) details this process. If you received only cash (no stock), then your entire basis was used against that cash (and you realize gain/loss on the sale of all shares). If you received only stock (a hypothetical scenario under the 50/50 cap; practically everyone got some cash), then all your old basis carries into the new Broadcom shares. In most cases, shareholders got a mix – so you will split your basis. Your brokerage might have already done this basis allocation for you; check your 1099-B and account statements. Tip: Ensure the sum of the basis allocated to the new AVGO shares plus the basis allocated to the cash equals your original total VMware basis (aside from any slight rounding). Any cash for fractional shares should use the fraction of your basis for that fraction. Because this can be confusing, don’t hesitate to seek help from a tax advisor or financial advisor. Getting the basis right is important for when you eventually sell the Broadcom stock, so you report the correct gain or loss at that time.

I received a large cash payout from the deal – what should I do with it?

Answer: Coming into a lump sum of cash can be both exciting and overwhelming. It’s wise to step back and make a plan for that money. Here are a few considerations:

1. Set aside money for taxes: As noted, the cash portion is likely taxable. If your VMware shares had substantial gains, be prepared for the capital gains tax you’ll owe. It may be prudent to reserve a portion of the cash for your upcoming tax bill (talk to your CPA about how much). The last thing you want is a surprise tax liability with no funds to pay it.

2. Revisit your financial goals: Ask yourself where this cash can best be put to work. Do you have high-interest debts you could pay down? Is it an opportunity to bolster your emergency fund? Or perhaps invest toward long-term goals (retirement, college, a home purchase, etc.)?

3. Aligning the money with your goals will help give it purpose.
Invest thoughtfully (don’t park it indefinitely): If you don’t need the cash imminently, you might consider investing it according to your asset allocation strategy. Leaving a large sum idle in a low-interest account could mean missed growth opportunities. On the other hand, don’t rush into the market without a plan – given market volatility, you might use strategies like dollar-cost averaging or other approaches to mitigate timing risk.

4. Avoid spur-of-the-moment decisions: A sudden windfall can tempt anyone to splurge or make risky bets. Before making major moves, it’s often beneficial to consult with a financial advisor for an objective second opinion. We have seen clients benefit from strategic planning around liquidity events like this, to avoid costly missteps and make the most of the opportunity.

In short, treat the cash as part of your overall financial picture. It should be deployed in a way that advances your long-term objectives. At Thorough Financial Group, we often help clients create a customized plan for windfalls – balancing paying taxes, re-investing, and enjoying a bit of it responsibly. If you’re unsure how to proceed, you’re welcome to schedule a meeting with us and we can discuss strategies tailored to your situation.

I received Broadcom shares – should I hold onto them or sell them?

Answer: This is a very personal decision and there is no one-size-fits-all answer. Broadcom (AVGO) is a large, well-established technology company, so some investors may be comfortable holding its stock for the long term. However, others may find that now they have an outsized single-stock position (especially if you elected stock in the merger). Here are key points to consider:

- Diversification and Risk: After the merger, you might find that Broadcom stock represents a high percentage of your portfolio. Holding a concentrated position in one company’s stock can expose you to significant volatility and risk. Financial advisors often recommend not having too much of your net worth in one company. Reducing concentration risk through diversification is generally wise. Ask yourself: if Broadcom’s stock dipped or stagnated, would it heavily impact your financial security? If yes, that argues for trimming and diversifying into other investments to spread the risk.

- Growth Potential: On the flip side, you may believe in Broadcom’s long-term prospects. Broadcom has a track record of strong performance and the VMware acquisition could enhance its earnings power. If you sell immediately, you could miss out on future gains if the stock continues to rise. Holding some or all shares might make sense if it fits your risk tolerance and investment plan.

- Tax Implications of Selling: Remember that the Broadcom shares you received came with a carryover basis from your VMware stock. If you sell the AVGO shares now, you’ll trigger a taxable event. Depending on how the basis allocation worked out, you may have a capital gain to report (for example, if the Broadcom stock’s market price has risen above your allocated basis). Also, if you sell very soon after receiving the shares, any gains would likely be short-term (if you hadn’t held the original VMware stock for over a year, or if the holding period doesn’t tack in a particular scenario), which are taxed at higher ordinary income rates. Some shareholders opt to hold the stock at least until any gain qualifies for long-term capital gains treatment (generally one year) to get a lower tax rate.

- Overall Portfolio Context: Consider how Broadcom stock fits into your overall investment strategy. If you’re underweight in technology and comfortable with it, keeping some AVGO might be reasonable. If you already have a lot of tech exposure, adding more could upset your portfolio balance. It might be an opportunity to rebalance.

Most importantly, make a plan rather than an emotional decision. You don’t have to do an all-or-nothing choice; for example, you could sell a portion of the shares to lock in some gains or generate cash, and keep the rest invested in Broadcom for long-term growth. Many of our clients choose a middle-ground approach. Consulting with a financial advisor can be invaluable here – we can analyze your overall portfolio, risk tolerance, and goals to help determine an appropriate course. We’ll consider factors like how much of your net worth is tied up in Broadcom, your need for liquidity, and the tax impact of selling vs. holding. The bottom line: There’s no universal “right” answer. The decision to hold or sell should be made in the context of your personal financial situation. If you need help weighing the trade-offs, Thorough Financial Group is happy to provide an objective analysis and guidance.

I’m a VMware employee – what happens to my VMware stock options or RSUs as a result of the merger?

Answer: If you were a VMware employee (or a recent ex-employee) with equity compensation, the merger affects your awards as well. In general, outstanding VMware equity awards were handled as follows:

Vested VMware shares (from RSUs or exercised options): Any VMware stock you already owned (from vesting or purchase) was treated like any other shareholder’s shares. So for vested shares, see the previous Q&As – you got Broadcom stock and/or cash for those, just as described. The more complicated part is unvested awards.

Unvested VMware RSUs: Typically, in such acquisitions, unvested VMware RSU (restricted stock unit) awards were converted into equivalent Broadcom RSU awards. Broadcom essentially stepped into VMware’s shoes as your employer from the stock perspective. Your VMware RSUs likely became Broadcom RSUs, with adjustments to reflect the merger deal. Often the number of shares in each award and/or the vesting value is adjusted so that the economic value is preserved. The vesting schedule may continue on its original timeline (though under Broadcom stock now), unless the merger triggered some special acceleration. Broadcom has reportedly continued VMware’s employee equity in many cases, but details matter – particularly around whether vesting of those RSUs continues seamlessly or if any acceleration (“double-trigger” clauses) apply. For example, some change-of-control agreements stipulate that if an employee is terminated within a certain period after the merger (double trigger), their unvested awards could vest immediately. You should review the communications from VMware/Broadcom HR or the merger agreement’s treatment of employee equity to know what rules govern your converted RSUs.

Unexercised VMware Stock Options: In-the-money VMware stock options would normally also be assumed by Broadcom. Typically, your VMware options would be converted into options to purchase Broadcom stock, with the exercise price and number of shares adjusted by the same ratio used in the merger (the 0.2520 per share and $142.50 framework) so that the intrinsic value remains equivalent. Many times, vested options might be cashed out at the $142.50 price if the company chooses, while unvested options could be converted to Broadcom options that continue to vest. The Broadcom 10-Q filing after the merger noted a substantial increase in stock-based compensation expense due to RSUs assumed in connection with the VMware merger, indicating those unvested awards carried over as Broadcom equity.

Every employee’s case can be a bit different depending on role and any special retention agreements. The key point is that your unvested equity was not simply lost – it was either converted into Broadcom equity with continued vesting, or paid out/cash-Settled, or a combination of both, according to the terms set forth in the merger plan. VMware’s employee communications or offer letters likely described what would happen. Be on the lookout for an email or packet titled something like “Important Information about Your Equity Awards Post-Merger.”

From a financial planning perspective, if you are now holding Broadcom RSUs or options, you’ll want to consider how they fit into your overall finances. Broadcom’s stock price will determine the future value of those awards, and you might have substantial equity in one company. Think about diversification once those RSUs vest, and plan for taxes on vesting (Broadcom’s stock is high in dollar value, so each RSU that vests could create a large taxable income event). Many VMware employees may now find themselves with a concentrated position in Broadcom via their ongoing RSUs. It’s wise to have a strategy for managing that – potentially selling some at each vest, etc., while considering market conditions and your personal goals. Professional advice can be very helpful here, as these decisions can be complex and have major financial implications. Don’t hesitate to reach out to a financial planner (and coordinate with a tax advisor) to map out a plan for your new Broadcom-based equity compensation.

(Note: Thorough Financial Group is not affiliated with VMware or Broadcom; we offer independent advice. We’ve helped many tech employees navigate mergers and understand their equity, and we’re happy to assist you as well.)

How can Thorough Financial Group help me navigate these changes?

Answer: The Broadcom-VMware merger has created a lot of financial questions and potential pitfalls for individuals – from tax handling to investment decisions. This is exactly the type of situation where professional financial advice can add value. At Thorough Financial Group (TFG), we specialize in providing guidance through complex financial events like corporate mergers, stock compensation transitions, and windfalls. In fact, working with an advisor can give you insights into how events like the VMware merger affect your long-term financial plan. Here are a few ways we can help:

Comprehensive Review: We’ll take stock (no pun intended) of what you received – how much Broadcom stock, how much cash – and evaluate it in the context of your overall financial situation. This includes reviewing your asset allocation, diversification level, and liquidity needs after the merger.

Tax Planning Coordination: Our team will work with you (and your tax professional) to make sure you understand the tax consequences. We can estimate potential capital gains from the cash portion, advise on withholding or quarterly tax payments if needed, and strategize ways to minimize taxes going forward (for example, managing the sale of Broadcom shares in a tax-efficient manner).

Investment Strategy for Proceeds: If you now have a sizeable amount of Broadcom stock, we’ll discuss strategies to manage the concentration risk – perhaps structuring a gradual selling plan or using hedging techniques, if appropriate. For the cash proceeds, we can advise on reinvestment options that align with your goals (be it rebalancing into other investments, funding a new opportunity, or even using some for lifestyle needs). The aim is to put that money to work in a way that suits your risk tolerance and objectives.
Equity Compensation Guidance: For VMware employees moving to Broadcom (or even those leaving VMware), we provide guidance on your stock options, RSUs, ESPPs, etc. Post-merger, the rules and choices (such as when to exercise options or how to handle vesting RSUs) can be confusing. We have experience helping clients navigate employer equity programs, and we can create a game plan for your Broadcom equity awards.

Risk Management and Financial Planning: Beyond the immediate merger aftermath, we’ll ensure that your broader financial plan is adjusted accordingly. Major changes like this are a good time to update your retirement projections, revisit insurance and estate plans if needed (especially if your asset values changed markedly), and make sure you’re still on track for your goals. Our role is to be your financial partner through these changes, providing clarity and direction.

At the end of the day, our mission is to simplify the complex and give you confidence in your decisions. The Broadcom-VMware deal has many moving parts and potential decision points for investors – you don’t have to figure it all out alone. Thorough Financial Group is based in Raleigh, NC, but we serve clients nationwide (we’re an independent firm affiliated with LPL Financial, one of the largest broker-dealer networks). We bring experience in corporate retirement plans, tech industry compensation, and personal wealth management. If you found this FAQ helpful but still have questions specific to your situation, we encourage you to reach out. You can schedule a free consultation with our team here at your convenience. We’ll be happy to discuss your goals and how to make the most of your Broadcom and VMware assets going forward.

Important: The above Q&A is for educational purposes and does not constitute personalized financial advice. Every individual’s situation is different. Thorough Financial Group and its advisors can provide recommendations tailored to your circumstances after a one-on-one review. Feel free to contact us if you’d like to explore that in detail!

Important Disclosures

General Information Only: The information provided here is for general informational purposes and should not be construed as personalized investment, tax, or legal advice. It may not cover all aspects of your unique situation. Before making any significant financial decisions, consider consulting with a qualified advisor or tax professional.
No Tax or Legal Advice: Neither Thorough Financial Group nor LPL Financial provides tax or legal advice. Any tax-related discussions are for informational purposes and you should consult your own tax advisor regarding your personal tax matters. We have referenced certain tax rules and forms (e.g., Form 8937) in this FAQ; these are general in nature and not a substitute for professional guidance.
Investment Risk: Investing in stocks (including Broadcom) involves risk, including the potential loss of principal. Past performance of any security or strategy (including the outcome of mergers) is not a guarantee of future results. Diversification strategies are intended to reduce risk but cannot assure a profit or prevent losses in declining markets.
Not Endorsed by or Affiliated with Broadcom/VMware: Thorough Financial Group is an independent financial services firm. We are not affiliated with, endorsed by, or officially connected to Broadcom Inc., VMware Inc., or any of their employees. All company names or trademarks mentioned (Broadcom, VMware, etc.) are the property of their respective owners and are used here strictly for explanatory purposes. Mentioning them does not imply any recommendation to buy or sell their securities.
Sources and Accuracy: Wherever possible, we have cited authoritative sources (press releases, SEC filings, etc.) in the format 【source†lines】 to substantiate the information provided. We believe these sources to be reliable, but we cannot guarantee the accuracy or completeness of third-party information. Please refer to official documents (such as Broadcom’s investor releases or VMware’s filings) for the most definitive information.

LPL Financial Affiliation: Securities and advisory services are offered through LPL Financial, a Registered Investment Advisor and Member FINRA/SIPC. Thorough Financial Group (TFG) is a separate entity but is affiliated with LPL Financial to provide brokerage and advisory services to our clients. Any investment professional at TFG is an LPL Registered Representative who may transact business only in states where they are registered or exempt from registration.
No Offer or Solicitation: This communication is not an offer to sell or a solicitation of an offer to buy any securities, and it should not be interpreted as such. It is also not an official communication from Broadcom or VMware. It is a commentary prepared by Thorough Financial Group for the benefit of our clients and the public.

For Residents of U.S. Only: Our services and advice are intended for residents of jurisdictions where we are licensed to operate. No offers of securities or advisory services can be made to persons in jurisdictions where we are not authorized.
By reading this FAQ, you acknowledge and understand these disclosures. If you have any questions about these disclosures or about how the Broadcom-VMware merger affects you, please contact us directly. We appreciate the opportunity to assist you with your financial needs!