Question: If you were in Staci’s situation, what would you do? Ethical Dilemma Staci Sutter works as an ana-lyst for Independent Invest-mentBankShares(I2BS),which is a large investment banking organization. Shehas been evaluating an IPO that I2BS is handling for atechnology company named ProTech Incorporated.Staci is essentially finished with her analysis, and sheis ready to estimate the price for which the stockshould be offered when it is issued next week. Accord-ing to her analysis, Staci has concluded that ProTech isfinancially strong and is expected to remain financiallystrong long into the future. In fact, the figures providedby ProTech suggest that the firm’s growth will exceed30 percent during the next five years. For these rea-sons, Staci is considering assigning a value of $35 pershare to ProTech’s stock.Staci, however, has an uneasy feeling about thevalidity of the financial figures she has been evaluating.She believes the ProTech’s CFO has given her whathe believes are quality financial statements. However,yesterday Staci received an e-mail from a friend, whowas an executive at ProTech until he was fired a fewmonths ago, that suggests the company has beenartificially inflating its sales by selling products to anaffiliate company and then repurchasing the sameitems a few months later. At the same time, Stacireceived a memo from her boss, Mr. Baker, who hasmade it clear that he thinks the ProTech IPO can beextremely profitable to top management“if it is han-dled correctly.”In his memo, Mr. Baker indicates thatthe issue price of ProTech’s stock must be at least$34 per share for the IPO to be considered successfulby I2BS. Part of Staci’s uneasiness stems from the factthat a coworker confided that she had seen the CEO ofProTech and his wife at an amusement park withMr. Baker and his wife last month. If ProTech’s salesfigures are inflated, Staci surely would assign a differ-ent value to the company’s stock for the IPO, but it willtake her at least two weeks to completely reevaluatethe company using different data. Staci knows that ifshe stays with her current analysis and she is wrong,the consequences can destroy I2BS because reputationis important in the investment banking business.
Question: If you were in Staci’s situation, what would you do?
Ethical Dilemma
Staci Sutter works as an ana-lyst for Independent Invest-mentBankShares(I2BS),which is a large investment banking organization. Shehas been evaluating an IPO that I2BS is handling for atechnology company named ProTech Incorporated.Staci is essentially finished with her analysis, and sheis ready to estimate the price for which the stockshould be offered when it is issued next week. Accord-ing to her analysis, Staci has concluded that ProTech isfinancially strong and is expected to remain financiallystrong long into the future. In fact, the figures providedby ProTech suggest that the firm’s growth will exceed30 percent during the next five years. For these rea-sons, Staci is considering assigning a value of $35 pershare to ProTech’s stock.Staci, however, has an uneasy feeling about thevalidity of the financial figures she has been evaluating.She believes the ProTech’s CFO has given her whathe believes are quality financial statements. However,yesterday Staci received an e-mail from a friend, whowas an executive at ProTech until he was fired a fewmonths ago, that suggests the company has beenartificially inflating its sales by selling products to anaffiliate company and then repurchasing the sameitems a few months later. At the same time, Stacireceived a memo from her boss, Mr. Baker, who hasmade it clear that he thinks the ProTech IPO can beextremely profitable to top management“if it is han-dled correctly.”In his memo, Mr. Baker indicates thatthe issue price of ProTech’s stock must be at least$34 per share for the IPO to be considered successfulby I2BS. Part of Staci’s uneasiness stems from the factthat a coworker confided that she had seen the CEO ofProTech and his wife at an amusement park withMr. Baker and his wife last month. If ProTech’s salesfigures are inflated, Staci surely would assign a differ-ent value to the company’s stock for the IPO, but it willtake her at least two weeks to completely reevaluatethe company using different data. Staci knows that ifshe stays with her current analysis and she is wrong,the consequences can destroy I2BS because reputationis important in the investment banking business.
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