Coorprate finance | Accounting homework help

Coorprate finance | Accounting

CASE STUDY 1: GROVE INC. (GRVI) SHARES SOAR FOLLOWING SHARE REPURCHASE AUTHORIZATION  

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  corporate finance 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.

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.

CASE STUDY 2: DIDI’S IPO WAS A DISASTER. HERE’S WHY CHINESE COMPANIES KEEP LISTING IN THE US

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.