Assignment 1 Corporate

Assignment 1 Corporate - Background ABC Learning was...

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Background ABC Learning was founded in 1988. In its early operation, ABC experienced a slow but stable growth. Until 1997 it successfully operated 18 childcare centres across Australia. Then, in 2000 the childcare benefit rebate system was launched by the Federal Government. This rebate system permitted every family to receive subsidiary childcare, and therefore, lead to a privatisation of profit childcare centres. The ABC Learning commenced its trading on Australian Stock Exchange on March 2001. It traded its shares with opening share price $2. After listed as public company in 2001, ABC experienced fast earning growth. Apparently to achieve a higher share price and dominant position in Australian market, ABC commenced to practice an international expansion strategy by acquiring childcare centres in US and Great Britain. During 2001-2006, it successfully courted significant largely investors including some Australian major bank for instance Commonwealth Bank, ANZ, and ANB. It also received investment from Singapore Government’s Sovereign Wealth Fund –Temasek Holding. Moreover, its share price reached highest price at $ 8.60 in December 2006. However, this early success did not retain for longer. In August 2008, the price of ABC’s share plummeted to $ 0.54. Then, in November 2008 ABC Learning was placed into voluntary administration with having the debt approximately $ 1.6 billion (CPA Australia 2010). Limitation of this research paper Due to investigation of issues in ABC Learning debacle being carry out until now, it is difficult to find good references which discuss and analyse issues in this debacle. Some free articles and assumptions are used to help in analysing the debacle and breach of directors’ duties. The Cause of ABC Learning’s debacle The failure of ABC Learning resulted from inadequate attention on core business from its directors during the massive growth phase, related parties transactions, overvaluation of intangible asset that lead to misleading information about the artificial inflated value of the organisation, and negligent corporate governance. All of these factors will be discussed in the following paragraphs. Inadequate attention on day to day operation A massive expansion distracted directors of ABC learning from day to day business operation based on examination by administrators Greg Moloney and Peter Walker of Ferrier Hodgson (Walsh 2010). Groves, a CEO of ABC Learning, had never used to agency’s service except for recruitment due to sick leave and annual leave. However, limited attentions in running personally the operation of company lead to use agencies for supplying and recruitment staff. As a result, the cost of agency staffing increased approximately
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This note was uploaded on 09/21/2011 for the course CMA 203 taught by Professor Simonmorris during the Three '10 term at Charles Darwin.

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Assignment 1 Corporate - Background ABC Learning was...

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