StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Emerging Growth Company Analysis - Case Study Example

Cite this document
Summary
The study "Emerging Growth Company Analysis" focuses on the critical, and thorough analysis of the major issues concerning the emerging growth company. It implies that the company expects to grow at about 5% to 10% per annum for the next 5 to 10 years to come…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER97.6% of users find it useful
Emerging Growth Company Analysis
Read Text Preview

Extract of sample "Emerging Growth Company Analysis"

Finance and Accounting Question One i) Intrinsic value –Benjamin Graham model V= EPS X (8.5 + 2g) X 4.4 Y EPS=net income shares = $51.9m $22.2m =$2.34/share Y= 1 + market yield 1 + inflation = 1 + 0.03 _ 1 1-0.1 =0.144 g=11% V=2.34 x (8.5 + 0.22) x 4.4 0.144 V=733 Therefore the stock was undervalued. ii) By terming themselves as an “emerging growth company” implies that the company expects to grow at about 5% to 10% per annum for the next 5 to 10 years to come. This therefore means that the growth of the company and therefore its earnings is gradual. In essence therefore, most people will invest in the company with a goal of getting higher earnings in the long-run. iii) Half for the primary and the other half for the secondary one iv) The company offered the shares towards the end of the year 2014. In light of this, the company expected that before the shares started trading in the stock market, the new year would have arrived. Most companies and opinions believe that the new year brings forth the increased earning potential of shares. In addition to this, most companies pay out bonuses and dividends as the year comes to a close. This therefore means that investors might have funds to participate in the initial public offering. v) The decision to involve the selected underwriters might have been well informed and carefully selected. The selected underwriters might have sent a positive message to the investors and therefore increasing their confidence and hope in the company’s prospective earnings. vi) In my informed opinion, the cost charged was fair bearing in mind the positive past track record of the underwriting companies chosen. This therefore could have influenced positively the decisions of the investors to participate on the public offering. Investor confidence on the parties involved is all it takes for a success in the initial public offering. I therefore believe that the compensation was fair and appropriate. vii) The overallotment offer to the underwriters acts like an incentive for them since they can use the overallotment funds to make some quick profits in the financial market as the allotment funds await to be returned back to investors. viii) The choice of the company’s listing venue was appropriate. NASDAQ is one of the leading stock markets in the world. Therefore, any company that lists there is regarded and perceived as a potential goldmine for the investors. This therefore influenced positively the decision of the investors to participate in the initial public offer. In addition, the venue has different categories where issuing companies can list according to their interests and prospects. ix) When companies issue shares to the public, the public is normally hopeful about the growth potential of the stock. This positive mindset and feedback might have resulted in an increase in the share price on the first day of trading. However, after the second day, the price of the stock decreased. This could have been as a result of certain market factors that came into play such as inflation. In addition to this, the public now might have researched more about the growth potential of the company due to the available and incoming information about the company. In this case, the feedback could have been negative thereby affecting the stock price in a negative manner. x) I would not recommend the flipping out of the IPO immediately. This is so because the factors that influence the stock price are very unpredictable due to the prevailing economic conditions and the available public information about the company. I would recommend an 80% issue and the remaining issued in bundles to capture the attention of investors with long-term investment mindsets. In addition to this, the company will be able to gather information available to the investors and use it to their advantage. xi) It is a proven fact that shares that underperform in the long-run perform better in the short-run. Having this in mind, I would recommend to the fund manager to consider investing in the initial public offering of the company in order to take advantage of the short-term gains that will arise before other economic factors fully set in to influence negatively the price. Currently, the medical industry has been experiencing tremendous growth and given much support by the government. However, this earning potential is not bound to last for a long time due to the saturation of the industry. As a matter of fact, the fund manager should consider making investment immediately in order to take advantage of the short-term gains for the benefit of his company. xii) Being one of the first companies in the health sector to consider using the strategy used by technology company places the company in a perfect position to fully take advantage of the benefits that come with this option among them being increased investor confidence and a some certainty that the company would go against the odds to achieve an increase in the share price in the long-run. Question Two i) As economic conditions enhanced in numerous markets, expanding levels of liquidity, coupled with reinforcing speculator certainty and a more positive way out environment brought about a slight increment in the worldwide aggregate of venture capital from 2013. Nonetheless, this report uncovers a captivating scope of variety in venture capital movement in diverse geographic hotbeds in 2013 that highlights some persevering truths about the venture capital business: to be specific, its capacity to always adjust and respond to changes in economic situations and reliably bolster the development of the worlds most dynamic new businesses and to convey returns for speculators. Various patterns developed or picked up force in 2013. ii) The reduction in the investor’s interests in funding start-ups has forced upcoming entrepreneurs to consider other sources of financing. For instance, they may use their savings, loans from family, friends and organized investment groups, government grants, and securing loans from banks, saccos and other financial institutions. These sources are relatively affordable. iii) Developing nations both from the Middle-East are way in front of Europe in beginning new organizations, yet few new businesses can possibly have an effect on occupations and development, and an insignificant number advantage from funding, with the larger part dependent on private financing. However, this trend is changing with some start-up owners beginning to embrace venture capital financing. The results is that more jobs are being created, and accelerated growth for these firms as they are able to cross innovation barriers and assimilation of technology in their operations to improve efficiency. iv) The government should consider reducing the barriers hindering venture capital funding from local and foreign firms. For example, the government should encourage foreign firms to assist start-ups by creating an enabling environment and cutting down the barriers to entry of such organization in the country. This intervention policy is appropriate since most foreign firms have the capability and the resources to fund and mentor the start-up and capitalize on technology to reduce inefficiencies and operating costs. Question Three i) Stage models may be fitting for portraying the innovative advancement and improvement of the spin-off firm, however are inadequate in clarifying how and why the undertaking moves starting with one stage then onto the next. However, such firms can be standalone and are able to move as usual (Churchill and Lewis, 1983; Galbraith, 1982; Scott and Bruce, 1987; Vohora et al., 2002). ii) a)When the spin-off occurs, the remaining company(Ebay) will have operational efficiency and decision making is bound to improve due to the reduction in the size of the firm(Lynch. 2000). iii) b) On the spin-off day, the stock cost of the guardian organization regularly drops to mirror the way that certain benefits have been expelled from its books and isolated into another separate element. When a spin-off begins exchanging, the costs of the guardian organizations and spin-offs stocks ought to indicate the cost of the old guardian organization stock before the spin-off, in any event at first. In the end the costs of the two new organizations will be set by the business sector in light of their individual values and prospects(Lynch. 2000) iv) In this case, there had been negative received publicity and most of the investors were for the spin-off. Therefore, when the spin-off occurred, it was a positive message to them and such information has a ripple positive effect on the stock price as the investor confidence was now boosted. Based on NASDAQ’s estimate, eBay is at present undervalued. Its fair value should be approximately $77 billion in market capitalization or $61 per share. v) As per NASDAQ, PayPals incomes are at a faster pace than eBays commercial center business. Upon the spin-off, it is predicted that Paypal’s proceeds may surpass eBay in business top in a couple of years. Therefore, Paypal’s may follow this trend too. Question Four The company will be sold at the face value since there are no expected changes are to take place in terms of the expected cashflows between years 2016 to 2020. References Ramamohan Rao Microeconomic Theory of Spinoff Decisions T. V. S. (Indian Institute of Technology, Kanpur, India) Volume 2, Issue 4. Copyright 2013. Aldrich, H. Organizations evolving, xv, 413 p. pp. SAGE Publications, London ; Thousand Oaks, Calif. 1999. Groh, Alexander, Liechtenstein, Heinrich and Lieser, Karsten "The European Venture Capital and Private Equity Country Attractiveness Indices," Journal of Corporate Finance, Volume 16, Issue 2,2010. Poterba J. Venture, Capital and capital gains taxation. In: Summers L (Ed), Tax policy and the economy. Cambridge; 1989.. Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“IPO case study Example | Topics and Well Written Essays - 1250 words”, n.d.)
Retrieved from https://studentshare.org/finance-accounting/1682553-ipo-case-study
(IPO Case Study Example | Topics and Well Written Essays - 1250 Words)
https://studentshare.org/finance-accounting/1682553-ipo-case-study.
“IPO Case Study Example | Topics and Well Written Essays - 1250 Words”, n.d. https://studentshare.org/finance-accounting/1682553-ipo-case-study.
  • Cited: 0 times

CHECK THESE SAMPLES OF Emerging Growth Company Analysis

Business Analysis

FirstName LastName Professor Course Date Title: Case Study, Business case analysis Executive Summary Tennant Company was founded in 1870 by George H.... Criteria and Evaluation of Alternatives by Criteria SWOT analysis Strengths Tennant has strength in their discovery and early adoption of new technologies.... Tennant company was founded in 1870 by George H.... The company drew popularity in the 1940s as a cleaning company that offered its services to the defense forces of nations especially those involved in war....
5 Pages (1250 words) Case Study

Growth of Nestle on Emerging Markets

Having recognized emerging markets as one the key growth drivers, the company's management has developed a strategy, focusing on new customer segments.... Obviously, while developing the company's growth strategy, Nestle's management team relied heavily on the global market trends and development tendencies.... For Nestle, it means that the company will be able to sell its products to a much larger amount of customers and to satisfy their modern needs and wants....
11 Pages (2750 words) Essay

Does It Make Sense for Nestle to Focus Its Growth Efforts on Emerging Markets

The company through mergers and acquisitions developed its growth and expanded its operations along with an increase in market share in emerging markets.... In 2009, the company had a 42 per cent fall down in its net profit.... per cent from its established markets whereas in Asian countries such as China there was around double-digit growth for the company.... n provisions of retail sales, the company is also ranked third after Mars-Wrigley and Cadbury in the emerging markets....
11 Pages (2750 words) Essay

The Coca-Cola Company Financial Results Analysis

The Coca-Cola Company Financial Results analysis Contents Accounting Policies 3 Reference 6 Introduction The Coca-Cola Company is a world famous company which was founded in 1886.... The analysis includes the overall growth of the group, growth in individual markets along with its long term goals and objective.... A special analysis has been done on the growth and performance of North American market.... From that humble back ground Coca-Cola company had spread its wings all over the world....
3 Pages (750 words) Assignment

The Coca-Cola Company Financial Results Analysis

The financial results analysis of the Coca Cola Company has been interesting in terms of growth in income and volume.... 1 in the year-to-date financial analysis (Rich et al 2009).... Furthermore, it would also reflect on the currency neutral of net revenues that affect the financial analysis of Earning per Share.... This suggests that the beverage company has strived to meet most of its goals and objectives to acquire the potential emerging markets....
3 Pages (750 words) Research Paper

Zara Company and the Growth Diversity

External environment analysis The external environment will have an analytical review using the PESTEL and Porter's Five forces model.... The external environment covers the analysis globally in apparel industries (Cunningham, 2012:34).... The paper "Zara company and the Growth Diversity" tells that Zara is a fashion and design company operating globally and meets the customer's demands instantly and affordably.... The report analyses the business and corporate strategies that Zara should undertake to maintain the company's growth....
18 Pages (4500 words) Essay

Organizational analysis of the Nike Company

This organization analysis paper sample has reviewed the current strategic position of Nike and found that the company is attempting to focus on nations that are in the process of fiscal turmoil.... Therefore, the company is strongly recommended to shift its focus towards emerging markets.... The company is having prestigious image in sports garments and sneaker industry.... The production facilities of the company are operating in distant parts of Bangladesh and India where employees are paid on an hourly basis (Leavy, 2004)....
10 Pages (2500 words) Research Paper

Growth Efforts of Nestle

In the paper 'Growth Efforts of Nestle' the author analyzes a Swiss-based global food company.... The company earns a majority of its revenues from outside its country of origin and has higher employee base.... Due to the small size of Switzerland the company was focused on the worldwide markets.... The author of the paper states that the saturated Western markets prompted the company to enter the emerging economies.... The main strategy of the company is to make a place in these markets before the entry of its rivals and establish its presence in the local markets by selling the items that are locally popular....
12 Pages (3000 words) Case Study
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us