coorprate finance

ACTIVITY BRIEF FOR ASSESSMENT 2

ACADEMIC YEAR 2021 – 2022 - FALL

Course BCO315 – Corporate Finance (3CH/4ECTS)

Instructor Geetha Rubasundram

Participation in all assessment activities stated in this document is required. An overall course total of 70

points is required to pass the course. Due dates and times are always in Geneva time.

ASSESSMENT 2

Description Due date and time

Weight of course total

Task 2.1: Quiz: Financial Forecasting & Cash Budget and

implications on M&A activity

Assessment type: Quiz

Description: Answer four mini essay-type questions – mix of conceptual and computational questions regarding financial forecasting and budget.

For further details of this assessment task, please consult the activity description on the relevant week of the course site.

Week 6 10%

Main task

Task 2.2: Midterm-Assignment

Assessment type: Written assignment

Description: Timed assignment consisting of a set of case studies on the material of Weeks 1-7.

See sections below for further details.

15/11/2021 14:00 20%

IN STR UCT ION S

Main task: Mid Term Assignment

You will be required to read the provided case studies to answer the questions given.

Please see details in the ‘Additional Information’ section below.

FORMAT

Your submission must meet the following formatting requirements:

• Submit one file only.

• Required file format for main submission: PDF.

• Additional file format for additional deliverables: Not applicable.

• Additional file requirements: None

Other details:

• Font size 12

• Double-spaced

• Number of words: Please be pragmatic and objective on your answers. However, as a guide an

answer scheme of around 1,500 to 2,000 words should suffice with the required level of depth for both

the questions.

All refencing and citations require Harvard referencing style.

LEARN ING OUT COMES

This task assesses the following learning outcomes:

Demonstrate a deep understanding of:

• Demonstrate a deep understanding of the theory and practices of financing a firm and its capital

structure.

• Evaluate the financing risk that may result from the chosen debt ratio.

• Critically evaluate the dividend payout ratio.

• Describe and analyze the trade-off between paying dividends and retaining the profits within the

company.

• Explain the purpose and procedure related to stock re purchases.

• Evaluate and advice on a firm going from private to a public company.

ASSESSMENT CR IT ER IA

Task 2.1 – Quiz

Students must demonstrate clear understanding of the concepts of the contents of Weeks 5 & 6. The students

are expected to answer the four mini essay type questions with calculations with an explanation of the

implications based on the analysis. Each mini essay will be worth 2.5 points. Points will not be deducted for

incorrect answers.

Rubric: Task 2.2 – Mid Term Assignment

Criteria Accomplished (A)

Proficient (B) Partially proficient (C)

Borderline (D)

Fail (F) Weight on

grade

Problem identification

The business issue has been correctly identified, with a competent and comprehensive explanation of key driving forces and considerations. Impact on company operations has been correctly identified. Thorough analysis of the issue is presented.

The student correctly identified the issue(s), taking into account a variety of environmental and contextual drivers. Key case information has been identified and analyzed.

The student correctly identified the case (issues), considering obvious environmental/co ntextual drivers. There is evidence of analysis, but it lacks depth.

The student correctly identified the issue(s) but analysis was weak. An absence of context – the work is basically descriptive with little analysis.

The student failed to correctly identify the issue(s); analysis was incorrect or too superficial to be of use; information was misinterpret ed.

30%

Information gathering

The student showed skill in gathering information and analyzing it for the purposes of filling the information gaps identified. Comprehensive and relevant.

Relevant information gaps were identified and additional relevant information was found to fill them. At least two different types of sources were used. The student demonstrates coherent criteria for selecting information but needs greater depth.

The student correctly identified at least one information gap and found relevant information, but which was limited in scope. Some evidence of sound criteria for selecting information but not consistent throughout. Needs expansion.

An information gap was identified and the student found additional information to fill it. However, this was limited in scope. Weak criteria for the selection of necessary information.

Information was taken at face value with no questioning of its relevance or value. Gaps in the information were not identified or were incorrect.

20%

Conclusions The student evaluated, analyzed, synthesized all information provided to create a perceptive set of conclusions to support the decisions and solutions.

The student evaluated, analyzed and synthesized to create a conclusion(s) which support decisions and solutions.

The student reached conclusions, but they were limited and provided minimal direction for decision- making and solutions.

The conclusion was reasonable but lacked depth and would not be a basis for suitable strategy development .

The student formed a conclusion, but it was not reasonable. It was either unjustified, incorrect or unrelated to the case in hand.

25%

Solutions The student used problem solving techniques to make thoughtful, justified decisions about difficult and conflicting issues. A realistic solution was chosen which would provide maximum benefit to the company. Alternative solutions were explored and ruled out.

The student used problem solving techniques to make appropriate decisions about complex issues. Relevant questions were asked and answered. A realistic solution was chosen. Alternatives were identified, explored and ruled out.

The student used problem- solving techniques to make appropriate decisions about simpler issues. The solution has limited benefit but does show understanding of implications of the decision. Alternatives were mentioned but not explored.

The student used problem solving techniques to make decisions about simpler issues but disregarded more complex issues. Implications of the decision were not considered. Alternatives were not offered.

The student formed a conclusion, but it was not reasonable. It was either unjustified, incorrect or unrelated to the case in hand.

25%

AD DIT ION AL INFO RMATION

TASK 2.2.

CASE STUDY 1: GRO VE INC . (G R VI) SHAR ES SO AR FOLLO WING SH AR E R EPUR CH A SE

AUTH ORIZAT ION Grove Inc. (GRVI) stock has had a wobbly time since its IPO. Once again GRVI shares are rising after the company announced a share repurchase program for up to 1 million shares of its outstanding common stock.

The innovator in health and wellness, Grove Inc. (GRVI), has been in the news lately. In the last week, the company launched its wholly-owned division to acquire promising Amazon and ecommerce businesses. The subsidiary will run with the name Upexi.

GRVI stock skyrocket above $9 on October 14, 2021 following the Upexi news. Now, the stock is once again approaching the $8 price mark with the common stock repurchase news. Overall, Grove has soared over 36% year-to-date and has jumped nearly 87% in this quarter. At the moment, GRVI is trading around its resistance point and the RSI confirms that, which is 70.46.

The fundamentals look good but the company is still relatively new on the stock market. The IPO just occurred on June 23, 2021. The quarterly sales have soared over 43% and the revenues increased by a whopping 250% in the fiscal year 2021 over 2020. The revenues totaled around $24.1 million, showing strong progress.

As of June 30, 2021, the working capital increased to $12,473,922 from a negative $869,760 in the same period last year. Whereas, the net increase in the cash this year was $13,646,694 compared to a negative $2,809,915 in 2020. The company expects the current fiscal year 2022 to outperform the fiscal year 2021. The prospects are bright for the company as we conclude the fundamentals of Grove.

The 1 million shares repurchase authorization shows GRVI’s commitment to increasing shareholder value. That will also help the firm in deploying some of the cash flow in the coming period. With improvement in revenues, a strong balance sheet, and positive cash flow, this might be the right time to authorize the option to repurchase stock.

Apart from that, Grove Inc. (GRVI) is also expanding its business. The launch of Upexi is part of its expansion plan. The company plans to take direct aim at the Amazon Aggregation market. Through Upexi, the company would integrate the e-commerce market as a desirable suitor to which prospective business owners may sell. That will provide potential sellers access to Grove’s programmatic ad technology, in-house digital marketing experts, and direct partnership with a team of expert Amazon PPC buyers.

Amazon is the biggest e-commerce marketplace and the pandemic has really ignited the online marketplace. It is a great opportunity for Grove Inc. (GRVI) to expand in the right market at the right time.

This article is accessible from https://stockstelegraph.com/grvi-shares-soar-following-share-repurchase-

authorization/

REQUIRED:

Provide your view on the above case study identifying the factors that could have caused the above impact to

the company. The answer scheme should clearly include an analysis of why a company would consider an

IPO and Share Repurchase Strategy.

CASE STUDY 2: DIDI'S IPO WAS A DISASTER. HERE'S WHY CHINESE COMPANIES

KEEP LISTING IN THE US On Tuesday, shares in Didi crashed 20% after Chinese authorities opened an investigation into the ride- hailing giant that raised $4.4 billion last week in a massive IPO in New York.

The botched IPO is bad news for investors. It's also bad for the New York Stock Exchange, which has been caught up in a campaign by US politicians who want to prevent Chinese companies from raising money in New York.

The political fallout was swift. Sen. Marco Rubio, a Republican from Florida who is highly critical of the Chinese government, told the Financial Times that it was "reckless and irresponsible" for Didi to be allowed to sell shares.

"Even if the stock rebounds, American investors still have no insight into the company's financial strength because the Chinese Communist party block US regulators from reviewing the books," Rubio told the UK newspaper. "That puts the investments of American retirees at risk and funnels desperately needed US dollars into Beijing."

The political atmosphere around listings of US companies has been charged for months. Former President Donald Trump signed a law in November that bans Americans from investing in firms that the US government suspects are either owned or controlled by the Chinese military.

That forced US exchanges to delist several Chinese companies, including China Mobile, China Telecom and China Unicom. President Joe Biden has followed the same path, expanding restrictions on US investment into Chinese companies with suspected military ties.

The big question: Given the political backdrop, why do Chinese companies continue to pursue US listings?

Analysts say there are several advantages to listing in New York:

Superior liquidity

A massive investor base

Streamlined listing process

For Chinese tech companies, a US listing is even more attractive because American investors are used to dealing with startups. And US exchanges accept a wider range of valuation methodologies.

Hong Kong has tried to steal business from New York in recent years, encouraging Chinese companies to sell shares in the city in what have been dubbed "homecoming listings."

But the pull of New York is strong. According to Jefferies, 10 Chinese companies completed US IPOs in 2020, representing over 20% of the market excluding SPACs — the highest percentage of US IPO issuance since 2010.

Didi was a continuation of that trend. It was the biggest US IPO by a Chinese company since Alibaba's debut in 2014.

End of an era? Pressure is not just coming from the United States. On Tuesday, China said it would increase regulation of overseas-listed companies, heaping additional pressure on Didi.

The government said it will severely punish illegal securities activities, including fraudulent share issuance, embezzlement and market manipulation. It said securities fraud was prominent in overseas markets.

This article is accessible from https://cnnphilippines.com/business/2021/7/8/Didi-s-IPO-was-a-disaster.-Here-

s-why-Chinese-companies-keep-listing-in-the-US-.html

REQUIRED:

Provide your views on the above article, evaluating the strategy mentioned in terms of an IPO / listing in an

international market.