In July 2022, Celsius Network filed for Chapter 11 bankruptcy. CEO Alex Mashinsky acknowledged that Celsius had grown its assets "faster than the Company was prepared to deploy [them]" and as a result had made "certain poor asset deployment decisions." Two months after filing, Celsius initiated a marketing and sale process to identify potential buyers for its assets. By April 2023, the field was reduced to NovaWulf and Fahrenheit, LLC. Both bidders proposed reorganizing Celsius' business as a going concern and giving its creditors and 1.7 million customers near-total ownership of the reorganized company. However, the ultimate fate of Celsius' many stakeholders remained anything but clear.
Following Dell's return to the public market in 2018, the company's stock underperformed. In June 2020, the Wall Street Journal reported that Dell was exploring various options with respect to its majority stake in the virtualization software company VMware.
In November 2018, Dell Technologies was poised to re-enter the public markets by means of a complex recapitalization that would replace an entire class of publicly-traded "tracking stock," with new shares that would trade publicly without the need of a formal IPO. The tracking stock was meant to track the value of the publicly traded shares of the software company VMware, but from the outset had traded at a significant discount, sparking intense criticism from analysts and shareholders, including Carl Icahn. In July 2018 the company announced the recapitalization, in which tracking stock holders could exchange their shares for new Dell shares or cash worth $109 a share. Dell had subsequently increased its offer to $120 a share. While Icahn and other large shareholders responded favorably to the new offer, a group of shareholders filed a class action lawsuit against Dell, alleging the offer was "financially unfair and coercive," and that Dell's directors had breached their fiduciary duties to tracking stock holders.
Hertz filed for Chapter 11 bankruptcy in response to ABS obligations and the COVID-19 pandemic. Enthusiastic Robinhood investors and shrewd negotiating tactics helped Hertz stabilize. Roughly nine months into the bankruptcy, Hertz received several bids to reorganize the company. Now, key Hertz advisors William Derrough and Tom Lauria must decide (i) whether the valuations implied by these bids are high enough, (ii) how they can negotiate higher valuations, and (iii) when to exit bankruptcy.
In November 2019, the iconic U.S. jeweler Tiffany agreed to be acquired by the luxury goods conglomerate LVMH. The $16.6 billion transaction was scheduled to close in mid-2020. However, in 2020, the global COVID-19 pandemic took a toll on the luxury goods sector. In September 2020 LVMH announced that it was backing out of the deal. Tiffany filed suit against LVMH. LVMH countersued, arguing that the pandemic triggered a material adverse effect (MAE) clause included in the merger agreement.
In March 2020, in response to the global pandemic, the cruise industry ceased operations. Carnival was the largest cruise line operator in the world, and CEO Arnold Donald and his management team worked to position the company to survive. They slashed operating expenses and capital expenditures, raised more than $10 billion in new debt and equity financing, and negotiated with creditors. Planned ship deliveries were cancelled, and less efficient ships were retired or sold. Had the company done enough?
In early 2020, the California-based utility PG&E filed a second amended plan of reorganization. PG&E had filed for Chapter 11 bankruptcy in the face of more than $30 billion of legal claims brought against it for its alleged role in causing California wildfires. The plan had the support of key creditors and shareholders and a court-appointed committee representing the wildfire victims. However, it faced strong opposition from California's governor, Gavin Newsom, who was concerned that PG&E's plan would leave it too highly leveraged, and unable to make necessary investments. Were Newsom's concerns valid ones? Did the plan as currently envisioned leave the reorganized PG&E with too much debt to meet its obligations to the wildfire victims while still making the necessary investments to update its equipment? And was PG&E prepared for the new reality of climate change?
In 2017, Constellation Brands, the U.S. based beverage company, acquired a 9.9% equity interest in the Canadian marijuana company, Canopy Growth. In 2018, Constellation announced a subsequent investment in Canopy-taking its ownership interest to 37%. However, Canopy's performance had been volatile and net losses had increased since the investment. In an effort to get into the cannabis market early, had Constellation Brands been too early?
In 2016, a trial began to determine the future of Sabine Oil & Gas Corporation's $3 billion chapter 11 reorganization plan. The plan called for first and second lien secured creditors to receive new claims representing approximately 98% of the reorganized company's enterprise value, leaving unsecured creditors, owed $1.4 billion, to recover less than two cents on the dollar. The plan had the support of the secured creditors, but unsecured creditors were strongly opposed. At the heart of the unsecured creditors' objections to the plan was a dramatically different view on valuation. How much were Sabine's oil and gas reserves worth today? How much were they worth at the time Sabine filed for chapter 11? And, based on these valuations, what was a fair recovery for Sabine's creditors?
In 2016, electric car manufacturer Tesla announced that it was making an offer to acquire solar panel manufacturer SolarCity in an all-stock offer worth $2.6 billion in Tesla stock. Tesla's co-founder and CEO, Elon Musk, believed that the merger would generate significant cost and revenue synergies, based on his vision of the future of transportation, energy storage, and a "green" economy. However, most Wall Street analysts were highly skeptical of the deal, voicing concerns that the merger would burden Tesla with excessive debt, and that Musk was using the deal to advance his personal interests (at the expense of public shareholders) and bail out Tesla. Concerns were raised over possible conflicts of interest, given that Musk owned over 20% of the stock, and sat on the board of directors, of both companies. The viability of the merger was also questioned given that neither Tesla nor SolarCity had ever been profitable.
The case analyzes the equity market value of Tesla Motors, the electronic car company founded and led by Elon Musk. Wall Street analysts are wildly divided on the future growth prospects for this company, and analysts' one year share price targets range from $160 to $500. The case explores in detail the valuation case made by two analysts covering Tesla, one a bull on the stock and one who is bearish. Students are asked to consider the arguments and the analytical approaches employed by each. Is Tesla a good investment or not?
Following the announcement of the merger of the Turkish Economic Bank (TEB) and Fortis Bank AS, Varol Civil, TEB's CEO, is faced with the task of executing the merger of these two entities. First, all parties must agree to the economic terms of this merger; a process that is challenging due to the complex ownership structures of these banks. Second, Civil and his team must find a way to combine the operations of the banks. With meaningful overlap between the two franchises the potential for cost savings and synergies is significant. However, the risks involved are also significant.
In early 2006, BlackRock, Inc. is considering acquiring Merrill Lynch's asset management business. The asset management industry was in a state of transition. In the prior year, more than 130 mergers and acquisitions had taken place. The proposed deal between BlackRock and Merrill Lynch would change BlackRock from a chiefly U.S.-based fixed income asset manager for institutional clients, to a firm with a global footprint and a strong equities and retail business. Was this the right thing to do to grow BlackRock? Was the timing right? Was the price right?
The September 2008 bankruptcy of Lehman Brothers was the largest in U.S. history. In 2007, Lehman achieved record earnings. What happened? Who is to blame?