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Cormac Kinney, Founder and CEO of Diamond Standard, was on a mission to transform the U.S. diamond market through unlocking the precious gems as market-traded assets. As a serial FinTech entrepreneur, he hoped to add an additional service to his vault: Carats. The commodity currency would be backed by a fungible resource, being the first in its field to have a physical-digital combination. Following the recent crypto-market crash, Kinney wondered if this was the right opportunity to launch his product. Although Kinney saw Carats as the best of both gold and other decentralized currencies, his advisors were wary of the potential regulatory risks that could ensue, in addition to the current dreary landscape of the crypto-market. Should Diamond Standard pursue Kinney's vision of Carats, or focus its limited resources on other diamond-backed financial products?

Business leaders are being urged to adopt a multistakeholder approach to governance in place of the shareholder-centered approach that has guided their work for several decades. But through hundreds of interviews with directors, executives, investors, governance professionals, and academics over the years, the author has found wide differences in how those leaders understand stakeholder capitalism. That lack of clarity can put boards and executives on a collision course with one another when decisions requiring difficult trade-offs among stakeholders' interests arise. It also creates expectations among stakeholders that if unfulfilled will fuel cynicism, alienation, and distrust. To help reduce the risk of such negative consequences, the author has created a guide for corporate leaders that illuminates four versions of stakeholder capitalism: instrumental, classic, beneficial, and structural. They reflect significantly different levels of commitment to the interests of stakeholders and rest on very different rationales.

Fraudulent behaviour in corporations is much more common than you might think. Indeed, the stories covered in the media are just the tip of the iceberg. The author, a Chair in Finance at the University of Toronto, shares findings from his research, which found that two out of three instances of fraud likely goes undetected. His analysis of the demise of Arthur Anderson indicates that prior to the 2002 implementation of Sarbanes Oxley (SOX), 41per cent of large public firms were misreporting their financial accounts in a material way and 10 per cent were committing securities fraud, imposing an annual cost of $254 billion on investors. He concludes that, if SOX reduced the likelihood of undertaking fraud by even 10 per cent, its high cost - estimated at $3.8 million per firm, on average - would be fully justified.

Raya Partners, a private equity firm, faces a crucial decision regarding Asa Specialty Coatings Company (ASCC). The dilemma involves shifting ASCC's manufacturing operations to Mexico, a move that would boost profitability and reduce emissions but result in significant layoffs in Vermont, impacting employees and the local community. Adrienne, Raya Partners' Chief Investment Officer, grapples with balancing financial gains, social responsibilities, and environmental considerations. The decision also tests Raya Partners' commitment to its ESG policy. Adrienne must devise a transparent communication strategy, explore fair severance packages, and consider ways to alleviate the financial burden. Ultimately, the choice made will define Raya Partners' values and shape ASCC's future.

This case tells the story of SMU Group, the third-largest supermarket operator in Chile. Having implemented a second restructuring plan (CIMA) between 2017 and 2019, the company was facing the challenge of having to implement a new corporate restructuring plan from 2020. SMU was created through successive acquisitions made between 2007 and 2013. This inorganic growth had led to a financial crisis, and the CIMA restructuring plan was implemented between 2014 and 2016, with the objective of improving operational efficiency, increasing revenues and reducing debt. Although SMU did achieve operational and commercial improvements, its debt burden remained high and the board of directors decided to continue the restructuring between 2017 and 2019. In an interview on November 24th 2019, Pilar Dañobeitía, president of the board and the decision maker in this case, highlighted that plan CIMA had positioned SMU as a solid company organizationally, financially, operationally and commercially. However, the credit ratings agencies International Credit Rating (ICR) and Humphreys had concerns about whether the operational and financial improvements at SMU represented a structural improvement. The following day, Pilar was due to announce the new corporate restructuring plan 2020-2022 to shareholders, but she wondered whether the new plan should include a direct response to the criticisms made by the ratings agencies, or just state that the current plan was addressing their concerns. In other words, Pilar asked herself whether the new CIMA plan should incorporate the criticisms made by the ratings agencies, or limit itself to continuing the current plan.

Lending firms like Partners for Growth (PFG) supplied growth capital to nascent companies, using debt instruments that did not dilute shareholders-contrary to traditional equity funding models. The customized approach allowed entrepreneurs to bring in additional capital without taking dilution in ownership. While instruments such as venture debt was becoming increasingly popular within the U.S. innovation ecosystem, venture debt and tech lending had yet to become widely available to entrepreneurial companies in the Middle East. PFG saw this as an opportunity to expand into the MENA region ahead of other organizations that were not as comfortable with the debt lending business model for start-up companies. The company's leaders had just finalized two term sheets and were discussing how PFG might support two different companies in the Middle East: Tabby, a fintech leader looking to expand "Buy Now Pay Later" financing; and Bayzat, a SaaS company that provided human resources solutions to small and medium-sized companies in the region.

This case reviews the market risks resulting from issuing and managing autocallable equity-linked instruments by a bank in the Asian markets. A number of weaknesses in the risk management framework of the issuing organization ultimately led to significant losses that could have been avoided. The purpose of the case is to identify these potential weaknesses and suggest what could have been done to improve the risk management framework of the organization. The case illustrates the two possible generic explanations for the losses at the issuer. On the one hand, some people involved first blamed the deficiency of the risk model and the quantitative framework; others put more blame on the structural shortcomings in the risk management framework.

Nirbhay Lumde, head of corporate social responsibility (CSR) at CGI Inc. (CGI), along with his efficient team, implemented certain novel CSR initiatives to address two critical societal issues: COVID-19 infrastructure and women’s safety in the context of India. CGI had to form partnerships with health care, law enforcement, and government to achieve greater impact from its CSR initiatives and to empower CGI’s employer branding. How could Lumde assess the effectiveness of CGI’s CSR initiatives? Which metrics were likely to help in this regard? Should Lumde consider expanding CGI’s CSR initiatives? Were there any potential benefits to CGI of doing so? If yes, what potential CSR opportunities could Lumde explore?

Nirbhay Lumde, head of corporate social responsibility (CSR) at CGI Inc. (CGI), along with his efficient team, implemented certain novel CSR initiatives to address two critical societal issues: COVID-19 infrastructure and women's safety in the context of India. CGI had to form partnerships with health care, law enforcement, and government to achieve greater impact from its CSR initiatives and to empower CGI's employer branding. How could Lumde assess the effectiveness of CGI's CSR initiatives? Which metrics were likely to help in this regard? Should Lumde consider expanding CGI's CSR initiatives? Were there any potential benefits to CGI of doing so? If yes, what potential CSR opportunities could Lumde explore?

This case examines the July 2016 decision by Israeli pharmaceutical Teva Pharmaceuticals Industries Limited (Teva) to raise USD19.5 billion in cash through a multicurrency bond offering to finance an acquisition that would firmly solidify Teva's position as the largest generic pharmaceuticals manufacturer in the world. In light of a pending acquisition of Actavis, the generic drug manufacturing arm of Irish-US pharmaceutical Allergen Inc. (Allergen), Teva management planned to sell USD19.5 billion in bonds at various maturities from 2 years to 30 years and in three different currencies (US dollar, euro, and Swiss franc). In the context of a significant cross-border acquisition, students are introduced to the pricing of corporate bonds with the invitation to price (specify the coupon rate) on Teva's bold global offering. This case is taught at Darden in the core finance curriculum of the MBA program in order to introduce the concept of the risk premium, risk, and the mechanics of pricing of corporate bonds.

Spreadsheet Supplement for Case UV8758

Micro and small businesses were considered the lifeblood and backbone of the economy, but financing difficulties impeded their ability to survive, grow, and thrive. Micro Connect was founded in 2021 to connect micro and small businesses in China with global investors. At the core of its business model was the distinctive system of daily revenue contracts (DRCs) whereby an invested store shared an agreed percentage of its revenue on a daily basis with Micro Connect in exchange for the up-front lump-sum capital investment. As a super connector, Micro Connect identified sustainable sources of global capital to channel into micro and small businesses in China. The Micro Connect Exchange would provide a platform where micro and small businesses could capitalize on their revenue streams by listing their DRCs, and investors could deploy their capital efficiently by leveraging liquidity and price discovery. Charles Li and Gary Zhang, the two founders of Micro Connect, were considering further steps they should take to meet the enormous financing demand from micro and small businesses in China and attract more global investors to the Micro Connect Fund and the Micro Connect Exchange.

This case explores the common cash-flow challenges that start-up businesses face as they straddle the conflicting objectives of business growth and cash preservation. In August 2022, Alex French, the CEO and cofounder of Bizzy Coffee (Bizzy), an emerging business in the rapidly growing cold-brew coffee market, prepares for a meeting with potential investors. His preparation requires a diagnosis of why Bizzy is burning so much cash, a proposal for getting the business to positive cash flow, and an assessment of the amount of financing required to get there. Students complete these tasks and build an understanding of cash flow and its importance to business stakeholders. It is designed for use in the core finance curriculum at Darden as part of a module covering financial modeling and analysis.

Spreadsheet Supplement for Case UV8754

A recent Master of Business Administration graduate from a renowned business school in India secured a position with a top rated asset management company. On the first day, his manager asks him to construct a portfolio using William Sharpe's single index model (SIM). To construct his model portfolio, he reviews the Bloomberg terminal for the data set. This exercise provides a step-by-step review of his analysis to construct a portfolio through SIM.

Instructor Spreadsheet to accompany product W34643.

Student Spreadsheet to accompany product W34642.

Sigma Ventures is a venture capital (VC) firm that invests in technology, intelligent manufacturing, healthcare, and consumer services companies in their early and growth stage. In late 2017 Li Yuan, Sigma Ventures' founder and managing partner, needed to decide whether a startup called Isolimit was worth investing in. If so, then Isolimit was to be valued. The case describes how Sigma Ventures assessed Isolimit's team, market, and technology and shows how Sigma used the venture capital method to evaluate its potential investment. Specifically, the case discusses three aspects of early-stage venture capital investments: (1) How should venture capital firms evaluate early-stage startups? (2) What is the logic of the venture capital method? (3) How should venture capital firms apply the venture capital method to determine the percentage stake they should receive in exchange for their investment?

Sigma Ventures is a venture capital (VC) firm that invests in technology, intelligent manufacturing, healthcare, and consumer services companies in their early and growth stage. In late 2017 Li Yuan, Sigma Ventures' founder and managing partner, needed to decide whether a startup called Isolimit was worth investing in. If so, then Isolimit was to be valued. The case describes how Sigma Ventures assessed Isolimit's team, market, and technology and shows how Sigma used the venture capital method to evaluate its potential investment. Specifically, the case discusses three aspects of early-stage venture capital investments: (1) How should venture capital firms evaluate early-stage startups? (2) What is the logic of the venture capital method? (3) How should venture capital firms apply the venture capital method to determine the percentage stake they should receive in exchange for their investment?

Background Note for product #CB0261 and CB0262.