tom case

tom case - Last updated: June 2002 Valuation of an...

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Last updated: June 2002 1 Copyright 2002 by Marketspace LLC, a Member of the Monitor Company Group LP. Limited classroom use of this publication for educational purposes is granted to registered members of . The express permission of Marketspace LLC is required for all extra-classroom use – including any and all publication or recording. Valuation of an Asian Internet Company Case Update In December 1999, two public Hong Kong companies formed, a mega-portal designed to offer a total China experience to both mainland and overseas Chinese communities. In February 2000, Tom issued stock valued from HK$630 million to HK$760 million to the public. This valuation was examined in the initial case, which offered a detailed analysis of how one might evaluate the prospects of a firm with large losses but a potentially huge future, such as Tom's operating performance over the full year since the case was first issued shows that the company has met revenue expectations as well as many of the business objectives identified in its IPO prospectus. Yet, in the face of Tom's successes, losses are such that it is impossible not to notice the shortfall from initial projections. What is most alarming about this outcome is that no profitability goals were listed among Tom's original targets. Was this an intentional omission? Was growth and market share so much more important to Tom that spending didn't matter? Can Tom evolve into a profitable investment regardless of its losses? And does it have value despite its lack of performance? Questions like these highlight the difficulty in evaluating an Internet startup on a purely financial basis. Adding to the confusion over how to forecast Tom's potential is the market in which Tom operates. If anything, it has become more uncertain since Tom's formation. The Chinese government is currently trying to grow the telecommunications infrastructure within the country, while simultaneously keeping control of information disseminated through that
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tom case - Last updated: June 2002 Valuation of an...

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