(c) Listing a large firm's stock is often considered to be beneficial to stockholders because the increases in liquidity and reputation probably outweigh the additional costs to the firm. (d) Stockholders have the right to elect the firm's directors, who in turn select the officers who manage the business. If stockholders are dissatisfied with management's performance, an outside group may ask the stockholders to vote for it in an effort to take control of the business. This action is called a tender offer. (e) The announcement of a large issue of new stock could cause the stock price to fall.
Case Studies in Derivatives Securities Case#8: Cephalon,Inc Cohort 6 Group 2 Jin Yi Zhang Sisi Ma Yue Yu Haiyang Risk Management or Speculating Cephalon should take SBC’s offer to buy call options on its own stocks. However, this is not an appropriate risk management decision and Cephalon is simply speculating. To manage its stock price risk, Cephalon should at least take measures to avoid the loss brought by DFA disapproving the projection. Since the possibility that DFA will approve the projection is expected to be as high as 70%, Cephalon bets that its profit will be higher. Thus this measure, to buy call options by selling stocks to SBC, is simply speculating.
In Mr. Buffett`s opinion, intrinsic value is the present value of the future expected performance. It`s estimated calculating the discounted cash flow of a business during its remaining life. It`s important because the DCF is the only logical way to evaluate the attractiveness of a business or an investment. Other alternatives to intrinsic value fall short in determining whether an investor is indeed buying something which is really worth and is therefore truly operating on the most basic principle which is aggregating value. The $2.55 billion gain in Berkshire`s market value of equity and the 6.28% jump on Scottish Power`s stock means that the acquisition was a win-win situation, creating value for both companies.
Thirdly, the stock option which intend to provide tremendous potential return to the founder of each Internal Venture, however, if the stock price of Telecam tumble down, the stock option will no longer an effective incentive to the founder member. Lastly, as the internal venture can be merged with Wireless division, the people and culture in Internal Venture (Two years separation could be a big difference) might not match to the current structure, culture and current people in Wireless division. It’s easy to do in term of structure but it would take a
(DeLong, & Ager, 2005) Bill Bailey’s concerns regarding the merger indicate that he feels that the merger would financially benefit the orchestra much more than it would benefit the opera. Bill may be able to successfully avoid the merger if he were to concentrate on illustrating the negative equity that the merger would bring to the opera and also on the fact that the opera really doesn’t need the orchestra in order to succeed. Because of this perceived inequality in regards to the merger outcome, Adams’s Equity Theory of Motivation would be a good choice to oppose the merger. “Defined generally, equity theory is a model of motivation that explains how people strive for fairness and justice in social exchanges or give- and- take relationships. As a process theory of motivation, equity theory explains how an individual’s motivation to behave in a certain way is fueled by feelings of inequity or a lack of justice, (Kinicki, & Kreitner, 2010) The opera is financially stable, has a sizable endowment fund, and has successfully expanded the number of its annual performances from three to four.
C. What information about securities must companies disclose? Discuss how Merliss should report the proposed preferred stock issue. a. Dividend and liquidation preferences b. Participation rights c. Call prices and dates d. Conversion rates and dates e. Exercise prices and dates f. Sinking-fund requirements g. Unusual voting rights h. Contracts to issue additional shares i.
Learning Objective As a group, you will use the Meetings tool to discuss the Mindersoft Case, and reach a consensus about the problem(s), analyze the problem, and recommend a defensible solution. Your group will: Evaluate an early-stage investment opportunity from the VC's perspective: market opportunity, business model, management team, and financials and come up with an offer for the entrepreneur. Perform the valuation of an early stage Company using the pre and post money method, the venture capital method and discounted cash flow method of valuation. Illustrate the valuation gap between the VC and entrepreneur and underscore that valuation is eventually driven by negotiation. Explore how entrepreneurs make financing decisions when they are faced with timing issues and low bargaining power versus VCs.
The economic considerations were substantial because not only would the decision raise the overall cost of the recapitalization, it would establish two undesirable precedents. The assets of Kohler Foundation, the charitable division of the corporation, were comprised entirely of Kohler Co. stock. If the price were to change, all short and long term projections for the foundation would need to been altered. Likewise, Kohler’s brother had recently passed away and the new value set by the court would, more than likely, affect the value of the deceased’s estate, which Kohler would then have to account for. The Kohler Company, as a manufacturer of plumbing fixtures, began when Kohler’s ancestor had decided to alter farm equipment and sell it as a bathtub.
On February 29, 1996, VoiceStream launched the first auctioned PCS license in Honolulu, Hawaii, and continued to aggressively build out its PCS licenses in the western United States, based on the GSM technology platform. On May 3, 1999, VoiceStream Wireless was spun off from its parent company, Western Wireless. In February and May 2000, VoiceStream completed merger transactions with two other regional GSM service providers, Omnipoint Communications and Aerial Communications. On May 31, 2001, Deutsche Telekom AG, (NYSE:DT) based in Bonn, Germany, completed its acquisitions of VoiceStream Wireless Corp. and Powertel Inc. In April 2002, T-Mobile International began bringing its family of companies together under the T-Mobile global brand name exclusively.
RHC made an offer to Metapath for shares of redeemable preferred stock. Metapath received an offer to be acquired by CellTech for company $115 million in common stock. This offer provided Metapath operating benefits because CellTech already has a strong customer and marketing base, and CellTech’s engineers could be beneficial to Metapath’s development group. In addition, $115 million was attractive to a company with a run rate of $25.6 million and this promised liquidity to shareholders in the near future, a lot sooner than an IPO that was over a year away. Also, this deal would not dilute the ownership of existing shareholders.