E-Newsletter from
 
 
 
Back to Newsletter Vol 3, Issue 01, Feb 2021
Finance
Buffett, who generally shied away from technology companies, made his first investment in tech stock in 2011 when he invested in IBM. He bought the stock based on the company’s past performance and future goals. But the stock soon lost ground, and Buffett exited IBM. Later on, he invested in Oracle, but sold the stock within a quarter. Betting on the future of Apple, he invested in the company at the beginning of 2016. Apple went on to become Berkshire’s largest holding, making up for more than 21% of its portfolio as of early 2019, with Buffett claiming that Apple was more of a consumer product company and not a tech company. The shares of Apple started falling after the company faced several challenges due to ongoing US-China trade war. At the same time, Buffett’s other investments in companies like Kraft Heinz did not yield the expected results. Another major investment of Berkshire – the one in Wells Fargo – also came under a cloud after the bank was caught in a fraud scandal. This case essentially debates the relevance and validity of Buffett’s investment principles in light of these five stocks. With the company set for a transition with the chosen successors ready to take over any time, does Buffett need to revise his philosophy to determine the future course of action for the company? Once the successors take over, should they continue with Buffett’s value investing or look for better ways of investing?

Investment Principles, Strategies, and Decisions: An Inquiry into Warren Buffett’s Perspective on his Roller Coaster Ride with Select Stocks
The case study brings out the alternatives available to Ritu, an MBA summer intern at Magnus Returns Private Limited (Magnus Returns), as she tries to study the Indian stock market before selecting option strategies for Surendra, a client of the company. Surendra wants to take a month-long position at the start of February 2020. Ritu has to submit a report to the portfolio managers within three days with a scenario analysis based on the three different scenarios given in the case study.

Options Strategies for a Range-Bound Market
The case is about cloud-based data warehousing company Snowflake Inc.’s Initial Public Offering, which was the largest initial debut of a software company on the New York Stock Exchange. On September 15, 2020, Snowflake priced its IPO at US$120 a share, well above the target IPO price of US$100 to US$110. The price range was revised upward from the original price of US$75 to US$85 a share that was set during the regulatory filing on September 08, 2020. On the first day of trading on September 16, 2020, the shares began trading at US$245 a share, resulting in the valuation increasing from US$12.4 billion in February to over US$ 67.94 billion during the debut, making its IPO the largest ever for a software firm in the US. The Snowflake IPO proves that there is a huge demand for the enterprise software market, which could get even bigger in the years to come.

Snowflake IPO: A Rebound for the US Stock Market
The case talks about the reasons for Wipro Ltd. (Wipro) deciding to buyback its shares. The case starts out with a brief history of Wipro. It outlines the buyback history of the company and its financials. The case also covers in detail the impact of the share buyback on the share price of Wipro. It concludes by detailing the benefits of share buyback for retail investors.

Wipro Limited’s Buyback of Shares in 2020
The case study can be used to discuss the concept of share buyback and the advantages and limitations it holds for companies and for the shareholders. It can also be used to understand the motive behind the companies going in for a share buyback, the different modes of share buyback, and the impact of share buyback on the market price of the share. The context provided in the case from the perspective of Tata Consultancy Services (TCS) can be used to discuss these aspects and can be helpful in understanding the practical implications of share buyback.

Share Buyback at TCS
In May 2020, one of the world's leading diversified natural resource companies, Vedanta Resources Limited, announced the delisting of its Indian subsidiary Vedanta Limited (VL), from the Indian stock exchanges. After completing the required formalities, the management commenced the delisting process in the first week of October 2020. Despite much hype and a positive response, the delisting process failed as the company did not receive sufficient offers from shareholders.

Failure of Vedanta Limited’s Delisting
WeWork, the New York-based start-up that revolutionized commercial real estate by offering flexible shared workspaces, attracted massive investments from the likes of SoftBank, Goldman Sachs, JP Morgan Chase & Company, and many other top private equity players. WeWork’s valuation soared to more than $47 billion in January 2019. But, its mandatory filing of S 1 papers on August 14, 2019, with the SEC to go public left investors unconvinced as they felt that the company did not deserve such a high valuation. WeWork’s complex corporate structure, questionable corporate governance and business practices, and less than anticipated financial projections, drove away potential investors. Adam Neumann (Neumann), WeWork’s CEO, found himself in the middle of the controversy with some analysts questioning the transactions between him and WeWork. The controversy led to a failed IPO and to Neumann exiting WeWork.

Financial Statement Analysis & Valuation Dilemma of WeWork (The We Company)
Impossible Foods, a US-based maker of plant-based meat, managed to raise $700 million in the pandemic year 2020. In just then 10 years of inception, it had managed to raise $1.5 billion from the likes of Bill Gates, Khosla Ventures, UBS, Temasek, and a host of celebrities including Serena Williams and Jay Z, who bet on plant-based meat, which they believed would revolutionize the environmentally unsustainable meat-based food industry. Its rival, Beyond Meat, launched its IPO in May 2019 and saw its valuation soar. Impossible Foods, on the other hand, seemed to be in no hurry for a public issue and raised record private investments in 2020. The case study captures the growth story of Impossible Foods and puts the reader in a position to understand the market structure of the plant-based food industry, competition among players, and the challenges faced by Impossible Foods. It helps the reader to better analyse the valuation challenges of a pioneering start-up in a nascent industry.

Valuation Challenges of Impossible Foods
Unsubscribe | Visit icmrindia.org
Case Research Center, IBS Hyderabad
 Reach us at: casehelpdesk@ibsindia.org
© Case Research Center IBS Hyderabad, 2021