FORTUNE — Carl Icahn this week asked Dell Inc. to scrap its plans to be taken private by founder Michael Dell, proposing instead that the company provide stockholders with a $9 per share special dividend.
His basic argument is that if Michael Dell is confident the company could thrive as a private concern after adding debt and disbursing some of its cash, then it also could thrive as a public company after taking similar actions.
What’s important to note, however, is that Dell’s (DELL) special committee already considered such an option, and rejected it. Here’s why:
1. There is no guarantee that Dell’s board agrees with Michael Dell’s assessment of what would happen to Dell post-buyout. In fact, I get the sense that some of them think the extra leverage would fry a hard drive that’s already on the fritz.
2. Michael Dell clearly dislikes being a public company CEO, and may quit if the buyout fails. If directors believe that Michael Dell is the best chance for turning the company around — which you’d assume they do, since they could fire him at any time — then keeping the company public could introduce shareholders to leadership risk.
3. Both Michael Dell and Carl Icahn want to tap some of Dell’s massive cash reserves to fund their plans, but a lot of that money is held overseas. In the buyout, Michael Dell assumes the entire repatriation tax risk. In a leveraged recap, that risk would be borne by public shareholders.
4. Leverage magnifies both upside and downside. For a public company, that means increased stock volatility. It also means that Dell would be more levered to the risks of missing earnings projections (a particularly salient concern for a company whose earnings accuracy rivals that of a Rick Ankiel curveball).
To be sure, little of this is likely to dissuade Icahn. Particularly given that the dividend effectively means that Dell shareholders only need the stock to remain above $4.65 in order to remain “ahead” of the buyout. But if Michael Dell’s efforts begin to sputter (assuming no superior bid during the “go-shop” period) and enough shareholders begin to consider Icahn’s plan to be a viable alternative, expect Dell’s special committee to use the above points to make its case.
Sign up for Dan’s daily email newsletter on deals and deal-makers: GetTermSheet.com
