Analysts believe that VMware, Inc. VMW 13.74%’s new tracking stock will likely trade at a discount to its common stock, but estimating just how much of a discount is a difficult proposition.

Dell announced a bid for EMC Corporation EMC 3.21% back in October. If the deal goes through, Dell will also acquire EMC’s 81 percent stake in VMware. Since the offer involved cash and stock, Dell plans on issuing shares of a VMware tracking stock. Deutsche Bank analyst Lon Parisi believes that the potential credit risk associated with the tracking stock and downward pressure from sales of the stock will likely mean that it will trade at a discount to VMware’s common stock.

Parisi turned to the options market to try to estimate just how much of a discount traders can expect. The starting point for Deutsche Bank’s calculation is the proposed terms of the deal itself:

1 EMC = 0.111 * VMW + $24.05

Parisi then generated…

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