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1.

How does the strategic repositioning of the company and the use of the IPO as an exit for minority shareholders affect the attractiveness of the IPO?

The strategic repositioning of the company was to gradually shift away and exist from customer care which TRX generated more than 50% in 2000, and Daviss long term strategy was to focus on the higher margin sectors, such as data transaction and integrations. By shifting away from customer care, of course would reduce operational cost and increase bottom line for the company but I think it would affect the attractiveness of the IPO in negative way. If I was an investor I would be in agreement with TRX only if they were reducing the customer care due to the high operating cost, but I mean reducing, not totally exist. In the service based company, interacting with end consumers is critical even know it has lower margin but the company should be able to profit from it, if it continues to operate in the future which I believe would create higher customer satisfaction and strong long term relationship with end-consumers. Davis decided to use the strategy to make the financial data looking good or positioning the company for the IPO which he knows that he was going to do in the future because the company need capital to support the firms growth, however to exist a sector was not good way to start with the risk that they might have lower customer satisfaction, as the company went IPO, any negative issues would tank the companys shares if they were not in good relation with end consumers. Davis had chance to improve the attractiveness of the IPO, he had two options; first one was go ahead with the IPO at the lower price of $9 per share, then he had to deal with Hogg Robinson whose intention was to exit TRX, and Sabre whose was in its best interest to sever the relationship with TRX. Their lack of agreement would eventually block the IPO, in order to prove the attractiveness of the IPO; Davis has to convince those two companies to agree upon the price so the proper managerial plan could carry forward. Second, David would just wait for some time to grow the company and complete the exit from the customer care business before the next IPO attempt while increase higher margin businesses. The use of the IPO as an exit for minority shareholders would eventually help the company better alignment of his stakeholders while offering liquidity for those minority shareholders an easy out which would increase the attractiveness of the IPO for small investors. 1. Estimate a preliminary file range for TRXs shares. CSFB had prepared a valuation of the file price range by comparing TRX to comparable publicly traded companies, there are really no direct competitors as a result there were not going to be perfect comparable company. The methods CSFB and TRXs management believed are best for them are both enterprise and price earnings multiples which would bring the company credit for its strong cash flow and an improving earnings outlook. In the EXHIBIT 9, by using enterprise multiple methods which a measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is calculated as market cap plus debt,

minority interest and preferred shares minus total cash and cash equivalents. Base on the result estimated from 2005-2006, the enterprise for online travel sector were around 15, for Payment Processors were about 10 and for distribution is around 7. The calculation is based on CSFBs financial projections on its own research and forecasts of TRXs business, and is more conservative if compared to TRXs managements forecasting. The second method is price earnings, it is a valuation of a companys current share price compared to its per share earnings and we calculated it by taking market value per share divided it by earnings per share, the ratio for online travel is around 25, for payment processors is about 20, for distribution is around 17, a high price earning suggests that investors are expecting higher earnings growth in the future compared to companies with a lower price earnings. For those two methods, a 15% discount was applied to this equity value based on the bankers belief that a newly public firm would not trade at the same value as a seasoned firm. The proposed IPO filing ranged based on analysis should be set at least $11 to $13 per share. However, due to the investor demand during the time of TRXs road show were really low, and the final IPO offer price will have to be $9 in order to attract more or enough investors. Technology changes so fast and brutal to make it more serious, Daviss long term goal as discussed in question 4 might not be as good as it really is due the uncertainties of being in such shifting and fast moving tech world, it is very likely that TRX might or might not fail, we dont know but if the company did not keep up with the skilled workforce and future prospects, it would put the company in a very difficult position even after IPO, if they are lucky, there could be some big investor jump in and take over the company but the chance are too low because TRXs is still too young in terms of operation, and even know that the revenue have been steadily increasing, the net income were still negative and there were too many I considered red flags in the financial statement, for example, goodwill on TRXs balance sheet have increased dramatically from 2003-2004, and current portion of long term debt almost 7 times as higher than previous year, all those factors be main contributor to the futures success of the company. One last thing is that while the TRX is going public, two of its main investors want to exit; if I am an investor, I wouldnt want to invest in the company.

2. Given the situation Davis faced in September 2005, what would you recommend that he do with respect to the offering? The situation Davis faced in September 2005 was tough, but the situation could be solved if he could convince Hogg Robinson, and Sabre which I recommend him to signify all the positive aspects of TRX such that they have strong relationship between majority shareholder in BCD technology, and present the

fact that due to the 911 incident, the travel industry had experienced some serious headwinds and should be recover as matter of time soon in the future and company will started to make profit if IPO is successfully launched, and proper managerial plan is implemented. Besides, some strength such that its ability to automate and engineer travel and travel related processes, if Hogg Robinson and Sabre agreed to the $9 price, then Davis should proceed with the IPO which will help TRX to raise capital to support growth and accelerate the transition away from customer care, when the company started to grow so their stock price should start to increase too therefore making up the difference of the companys expectation. I would recommend him do whatever he could at his best to proceed the IPO and I think it is the best option for the company. Otherwise chose the second option which is to withdraw the IPO and allow TRX time to grow and complete the exit from the customer care businesses, and some of TRXs operational uncertainty would also be reduced because the time might not be right as Delta and Northwest Airlines declared bankruptcy and the overall difficulties and risk as being a technology company. The first dimension be a proper fit, TRX cannot define all major problems and issues that is facing probing and analytical investment, and its products and services were only few, the information about the future perspective of the company given by the Davis were too simple, the only thing that he mentioned again and again is that the company need capital to expand and support growth. The company has the working capital deficit almost four times higher by comparing from 2001-2005 and two investment companies for TRX have declared they want to exit even when the TRX want go to public which would indicate that there are something wrong within the company or perhaps they just arent in agreement about that fact that the company is going public so TRX is not proper fit in the first dimension. Second, sharing of ownership seems to be a bit problem, as Davis have indicated that going public offered liquidity for minority shareholders, and lead to a better alignment of his stakeholders. As what it sounds like that Davis did not really want to give up majority of its shares to other companies therefore is not fit on this dimension too. Third dimension is investors appeal, Davis and TRX management met with investment bank which they selected Credit Suisse First Boston because CSFB had strong analyst coverage in the online travel and data transaction sector which Davis believed would help investors understand TRXs business model therefore they do fit in this dimension in terms of helping investors to understand their business model. Fourth one is the amount raised in capital for the company, Davis decided to officially start the IPO process with a proposed IPO of 6.8 million shares of common stock, 3.4 million primary share, and 3.4 million secondary shares. Even though they have all the shares planed out, Davis did not give any clear idea of how much the company really need to expand and how much ownership he is willing to abandon, as a result I will state that TRX did not meeting this dimension. Fifth, the purpose and timing

of the IPO, Davis has been thinking about going public since 2000, but due to the dot-come bubble burst, he was forced to abandon its IPO. After carefully exam the technology IPO market performance, Davis finally decided to file an S-1 registration statement with the U.S. SEC. on May 9, 2005. In term of purpose and timing, Davis has been very carefully, I think that he knows that he needs this success in IPO in order to support the company.