George Zegoyan and Amir Gupta face a ditticult decision. Their private auto parts manufacturing company has been a great success - too quickly. They cannon keep up with the demand for their product. They must expand their facilities, but have not had time to accumulate sufficient working capital, nor do they want to acquire long term debt to finance the expansion. Discussions with there accountants, lawyers, and stockbrokers have confronted them with the necessity of going public to raise the required capital. ess Zegoyan and Gupta are concerned about maintaining control if they become a public company. They are also worried about loss of privacy because of the required reporting to various regulatory bodies and their their shareholders. Naturally, they are also pleased that the process will enable them to sell some of their shareholdings to the public and realize a faiir profit from their past and expected future successes. They will be able to sell 40 percent of the shares for $500,000, which is ten times their total investment in the company. It will also allow them to raise substantial new capität to meet the needs of their current expansion program. 21F ES cies Course The proposed new structure will allow them to retain 60 percent of the outstanding voting shares, so they will keep control of the company. Nevertheless, they are somewhat uneasy about taking this step, because it will change the nature of the company and the informal method of operating they are used to. They are concerned about having partners" in their operations and profits They aré wondering whether they should remain as they are and try to grow more slowly, even if it means giving up profitable orders. ts ento DISCUSSION QUESTIONS nent public viable c 1. Do they have any other options besides goirng public? Is the franchise route i5 even if it means forgoing profits now? Why? 2. Do you think they should try to limit their growth to ă manageable Size to avoid going peration? Explain. 3. Would you advise them to sell their business now if they can get à good price
George Zegoyan and Amir Gupta face a ditticult decision. Their private auto parts manufacturing company has been a great success - too quickly. They cannon keep up with the demand for their product. They must expand their facilities, but have not had time to accumulate sufficient working capital, nor do they want to acquire long term debt to finance the expansion. Discussions with there accountants, lawyers, and stockbrokers have confronted them with the necessity of going public to raise the required capital. ess Zegoyan and Gupta are concerned about maintaining control if they become a public company. They are also worried about loss of privacy because of the required reporting to various regulatory bodies and their their shareholders. Naturally, they are also pleased that the process will enable them to sell some of their shareholdings to the public and realize a faiir profit from their past and expected future successes. They will be able to sell 40 percent of the shares for $500,000, which is ten times their total investment in the company. It will also allow them to raise substantial new capität to meet the needs of their current expansion program. 21F ES cies Course The proposed new structure will allow them to retain 60 percent of the outstanding voting shares, so they will keep control of the company. Nevertheless, they are somewhat uneasy about taking this step, because it will change the nature of the company and the informal method of operating they are used to. They are concerned about having partners" in their operations and profits They aré wondering whether they should remain as they are and try to grow more slowly, even if it means giving up profitable orders. ts ento DISCUSSION QUESTIONS nent public viable c 1. Do they have any other options besides goirng public? Is the franchise route i5 even if it means forgoing profits now? Why? 2. Do you think they should try to limit their growth to ă manageable Size to avoid going peration? Explain. 3. Would you advise them to sell their business now if they can get à good price
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
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Transcribed Image Text:George Zegoyan and Amir Gupta face a ditticult decision. Their private auto parts manufacturing company has been a great success - too quickly. They
cannon keep up with the demand for their product. They must expand their facilities, but have not had time to accumulate sufficient working capital, nor
do they want to acquire long term debt to finance the expansion. Discussions with there accountants, lawyers, and stockbrokers have confronted them
with the necessity of going public to raise the reguired capital.
ess
Zegoyan and Gupta are concerned about maintaining control if they become a public company. They are also worried about loss of privacy because of
the required reporting to various regulatory bodies and their their shareholders Naturally, they are also pleased that the process will enable them to sell
some of their shareholdings to the public and realize a faiir profit from their past and expected future successes. They will be able to sell 40 percent of the
shares for $500,000, which is ten times their total investment in the company. It will also allow them to raise substantial new capitäl to meet the needs of
their current expansion program.
21F.
ES
cies
Course
The proposed new structure will allow them to retain 60 percent of the outstanding voting shares, so they will keep control of the company. Nevertheless,
they are somewhat uneasy about taking this step, because it will change the nature of the company and the informal method of operating they are used
to. They are concerned about having partners" in their operations and profits They aré wondering whether they should remain as they are and try to
grow more slowly, even if it means giving up profitable orders.
ts
ents
DISCUSSION QUESTIONS
nent
public
viable
1. Do they have any other options besides going public? Is the franchise route
even if it means forgoing profits now? Why?
2. Do you think they should try to limit their growth to a manageable size to avoid going
operation? Explain.
3. Would you advise them to sell their business now if they cân get a good price and then start
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