Staci Sutter works as an analyst for Independent Investment Bankshares ( IIBS ) , which is a
Question:
Staci, however, has an uneasy feeling about the validity of the financial figures she has been evaluating. She believes the ProTech's CFO has given her what he believes are quality financial statements. however, yesterday Staci received an email from a friend, who was an executive at ProTech until he was fired a few months ago, that suggests that the company has been artificially inflating its sales by selling products to an affiliate company and then repurchasing the same items a few months later. At the same time, Staci received a memo from her boss, Mr Baker, who has made
it clear that he thinks the ProTech IPO can be extremely profitable to top management if it is done correctly." In his memo, Mr Baker indicates that the issue price of ProTech's stock must be at least $ per share for the IPO to be considered successful by IIBS. Part of Staci's uneasiness stems from the fact that a coworker confided that she had seen the CEO of ProTech and his wife at an amusement park with Mr Baker and his wife last month. If ProTech's sales figures are inflated, Staci surely would assign a different value to the company's stock for the IPO, but it will take her at least two weeks to completely reevaluate the company using different data. Staci knows that if she stays with her current analysis and she is wrong, the consequences can destroy IIBS because reputation is important in the investment banking business. If you were in Staci's situation, what would you do
Corporate Finance
ISBN: 9781265533199
13th International Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe