Merit Enterprise Corp Essay Example

financial information, such as periodic cash flows and financial statements. * This situation may result in agency problems due to conflicting interests among stakeholders, management, and lenders.

b. Option 2 proposes a public share issue as a means to raise the required $4bn. The advantages of this option are as follows: * The primary share issue can sufficiently fulfill the $4bn requirement. * The company's strong financial performance in recent years can result in a premium valuation for the stock in the primary market. In the case of high risk associated with the $4bn investment, this form of funding is appropriate as it does not involve fixed financial obligations. * Stock options and other incentives can be utilized by Merit to reward and retain its employees.

The company's brand image improves, providing better visibility and acknowledgment. However, there are drawbacks to this issue. Firstly, Merit will change from a privately held to a public limited firm, altering the ownership pattern and diluting control. Additionally, issuing primary shares is a time-consuming process that involves numerous procedures such as hiring merchant bankers and registrars. It is also a more expensive form of funding, requiring higher disclosures as a listed company. Furthermore, there will be increased regulations imposed by regulators like the SEC and stock exchanges. Lastly, since the stock will be traded in the secondary market, there is the potential for significant investments by individuals or institutions.

Which option should Sara recommend to the board? I believe Sara should recommend option 2 because:

• The company's growth trajectory may require continuous funding, which cannot be solely met through retained earnings and debt. Thus, issuing equity would be a wise decision to
  

consider future needs.

Today, we find ourselves in a global market where competition extends beyond local peers to international players. Consequently, going public offers numerous advantages such as improved visibility, enhanced brand image, a wider investor base, and greater recognition.