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Written Assignment - Unit 6_Constantine’s Grocery Case Study.pdf

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MERGES, BUY-OUTS, AND THE INITIAL PUBLIC OFFERING (IPO) PROCESS1Constantine’s GroceryCase StudyBUS 5111-Financial ManagementWritten Assignment Unit 6 - University of the PeopleSeptember 15, 2019Instructor:Dr John Parker
MERGES, BUY-OUTS, AND THE INITIAL PUBLIC OFFERING (IPO) PROCESS2IntroductionOver the past 60 years,Constantine’s Grocery, a business family company located in asmall city in the USA became a full-service grocery store chain with many stores throughout thecity. Now it is facing a decision to raise capital to maintain its current business operations and toallow the possibility of growth in the future. The family believes it needs an additional $135million dollars. This sum is too large for a bank line of credit and no one in the family hasadditional funding to invest into the company.So, the family is considering other alternatives. One alternative is to publicly issue debt(corporate bonds), the other alternative is to issue common stock to the public.AnalysisHow a public offering occursAccording Jagerson (2019) an initial public offering (IPO) is essentially the birth of acompany in its public form. It changes many things about the way that management runs the firmand can present opportunities and dangers for retail investors. IPOs are more common duringbull markets and the recent rally in stocks may provide another fertile environment for thesecorporate events.He also points out that “if a private company needs capital that beyond its own ability toself-finance through operating cash flow there are a few alternatives management and the firm’sownership can utilize to provide that capital”. (Jagerson, 1999, para. 2).“These may include debt, private investment or a public investment through an IPO. Eachof these alternatives is evaluated based on current and projected needs for cash”. (Jagerson,1999, para. 3).
MERGES, BUY-OUTS, AND THE INITIAL PUBLIC OFFERING (IPO) PROCESS3What Is Common Stock? The Basics and How They WorkAccording to Amadeo (2019) Common stocks are shares of ownership of a corporation.They allow you to own a portion of the company without taking possession. They are the type ofstocks that most people are thinking of when they use the term "stock." The other kind ispreferred stock.Like other securities, stocks are traded on a secondary market called the stock market.That makes them liquid as well as easy to price. As a result, they are excellent indicators of theunderlying value of the assets. The other common type of security is a bond. (Amadeo, 2019,para. 2).

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Term
Fall
Professor
Dr. Schmidt
Tags
Amadeo, Sraders

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