Company G is involved in the business of providing in-flight internet service. It has made a major strategical change in its approach as soon as it acquired a 10-year license from the Federal Communication Commission for in-flight internet services. The company plans for international expansion as a part of its long-term plan which is most critical for generating profit. It signed an agreement with company D to install its equipment in 170 international planes. The company entered an IPO in June 2013, raising $187 million with $17 per share. Within months the price of the stock fell to bottom hitting $10. The enormous technological cost resulted in the loss and in December 2016, the balance sheet has more liabilities than assets. The company has made a big investment decision by improving its speed of service and started to penetrate deeper into the international market where the stocks of the company will increase. To determine: The reason why a company decides to sell its stock rather than taking debt financing and decide whether the decision is a good one?

Question

Want to see the full answer?

Answer 1

Question

Chapter 17, Problem 17.30C

Summary Introduction

Case summary:

Company G is involved in the business of providing in-flight internet service. It has made a major strategical change in its approach as soon as it acquired a 10-year license from the Federal Communication Commission for in-flight internet services.

The company plans for international expansion as a part of its long-term plan which is most critical for generating profit. It signed an agreement with company D to install its equipment in 170 international planes.

The company entered an IPO in June 2013, raising $187 million with $17 per share. Within months the price of the stock fell to bottom hitting $10. The enormous technological cost resulted in the loss and in December 2016, the balance sheet has more liabilities than assets.

The company has made a big investment decision by improving its speed of service and started to penetrate deeper into the international market where the stocks of the company will increase.

To determine: The reason why a company decides to sell its stock rather than taking debt financing and decide whether the decision is a good one?

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

What is a good response to this post? While Australia and the United States share very similar cultures overall, there are a couple of differences that must be considered when developing REI's global expansion strategy. Both countries score low in the "Power Distance" category because managers tend to incorporate employee perspectives into the decision-making process and manage their teams in an inclusive, participatory manner (The Cultural Factor Group, 2023). "Motivation Towards Achievement and Success" (formally Masculinity) is also similar with the high scores in both countries qualifying them as "decisive" cultures that value professional and personal success and achievement (The Cultural Factor Group, 2023). The two areas where there is the greatest difference are in the "Individualism" and "Uncertainty Avoidance" categories. Australia is considered a more individualistic society with a greater emphasis on self-reliance over communal and government involvement in personal and…

What is a good response to this post? Nike’s value chain reengineering is a stellar example of how effective BPR can lead to consistent success. By focusing on high-value, knowledge-intensive activities like design and marketing within the U.S. and outsourcing manufacturing through third-party contractors, Nike was able to streamline its operations and put a focus on core competencies. This approach has allowed Nike to achieve high returns while maintaining flexibility and adaptability in its supply chain. However, while Nike exemplifies success, not all reengineering efforts see positive results. An example of an unsuccessful BPR occurred with Hershey’s ERP (Enterprise Resource Planning) system implementation in 1999. Hershey’s sought to improve its processes by rolling out a new integrated software system to manage production, operations, and distribution. While their goal was to increase efficiency and streamline delivery, poor planning ultimately doomed the project. Hershey…

What is a good response to this post? When planning for global expansion into Italy, it's important to understand the cultural differences between Italy and the United States as outlined by Hofstede’s four dimensions. Italy and the U.S. exhibit comparable scores in Power Distance, reflecting a similar approval of hierarchical systems and authority in organizations. Both cultures acknowledge the importance of leadership roles while also respecting egalitarian principles. The U.S. scores higher in individualism compared to Italy, indicating a strong focus on personal achievements and independence. In contrast, while Italy is still individualistic, it places a greater emphasis on family and close-knit relationships. This suggests that in Italy, business decisions may be impacted more by familial ties and personal networks than they are in the U.S. Both countries show high masculinity scores, reflecting a cultural preference for competitiveness, achievement, and material success. This…