I need to answer these questions but im not really sure how....can someone please help me? thanks?
1. Bernie Ebbers, The CEO of WorldCom, a major telecommunications company, was having personal financial troubles. Ebbers pledged a large stake of his WorldCom stock as security for some personal loans. As the price of WorldCom stock sank, Ebbers ‘ bankers threatened to sell his stock in order to protect their loans. To avoid having his stock sold, Ebbers asked the board of directors of WorldCom to loan him nearly $400 million of corporate assets at 2.5% interest to pay off his bankers. The board agreed to lend him the money. Comment on the decision of the board of directors in this situation.
2. Gigi Liken and Ron Bobo are organizing Gold Unlimited Inc. to undertake a high-risk gold-minning venture in Canada. Gigi and Ron tentatively plan to request authorization for 75,000,000 shares of common stock to be sold to the general public. Gigi and Ron have decided to establish par of $1 per share in order to appeal to a wide variety of potential investors. Gigi and Ron feel that investors would be more willing to invest in the company if they recieved a larger quantity of shares for what might appear to be a "bargain" price. Discuss whether Gigi and Ron are behaving in a professional manner.
- 1 decade agoFavorite Answer
1)well the board took a good decision by lending him the $400 mill .Because if they had not loaned it, then Ebbers would not have been able to pay off his bankers and as a result the bankers would have sold Ebber stake in Worldcom. And as this stake is large, placing such a huge amount of shares in the market would have brought down the stock prices of Worldcom thus crashing it.
2) weathered Investors generally do not invest in a company just because they can receive a larger quantity of shares at bargain price. They take into account several other factors such as feasibility, return gain, credibility and such.thus Gigi and Ron's plan is not wrong.
- revelleLv 43 years ago
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- 3 years ago
Looking for a good answer on this too
- Anonymous3 years ago
thanks to each and everyone of you for the answers!