Martha Stewart Essay Example
Martha Stewart Essay Example

Martha Stewart Essay Example

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  • Pages: 4 (893 words)
  • Published: June 1, 2017
  • Type: Tests
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1. What was the basis of Martha Stewart’s reputation? In term of financial reputation, it will be on market share and stock price.2.

Why did MSO’s stock price decline due to Martha Stewart’s loss of reputation? Due to Martha’s fame and recognition of her show, many people therefore invested their money in the company. However, when Martha was accuse for insider trading which has went against her credibility, investor start to pull out from stock by selling away their stock. Added to that, investor are fearful and terrify that if she is convicted, she may lose her company to settle her debt and therefore, would rather pull out from the stock then to suffer any further losses.3.

Who is Martha Stewart’s target market? Her target market would be mostly for women who have time where they can dedicate their time i


nto making of sumptuous meals.4. What qualities were associated with the Martha Stewart brand, before the controversy? I would think that the qualities would be credibility, reliability, trustworthiness, and responsibility.5. Which of these were affected by the accusations of insider trading, and how? How would you find out for sure? Because we all know that insider trading is prohibited where it has tarnished the qualities such as credibility, reliability, trustworthiness, and responsibility.

It is unethical for such incident where it create unjust advantage for other’s market. I would think that in order to find out more, we can do an assessment on all the investors who pull out from the stock to determine what are the main reasons why they invested initially but pull out from the stock after that. This would give a clearer

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picture of what has happened.6. What level of sales and profits would MSO have reached if Martha’s reputation had not been harmed? Refer to SEC or MSO websites for information on financial trends.

I would estimate that the profits would be $592 million if Martha has not incurred in her loss of 31% in advertisement due to her indict of insider trading.7. What range would the stock price have been in at the end of 2002 based on your estimates? Based on the calculation that the stock price would be increasing estimate of $3 every 2 months, by the end of 2002, the stock price would be estimate to $30 per share.8.

Martha’s overall net worth was huge relative to her investment in ImClone. Assuming she did not have inside information, was there any way she could have avoided the appearance of having it? She could have just ridden out the storm with the stock in her portfolio and taken any loss that may have occurred. It was not certain the reason why the FDA was going to reject the application, it may have been something that could have be rectified and then resubmitted, which would have caused no loss in stock price to Imclone.9.

How could Martha have handled this crisis better? Martha should have arranged for a press conference to the media that she has indicted into the insider trading and admit her misconduct. This would reduce her losses to the lowest rather than not telling the truth about the agreement. This would also have assured that the investors would not lost faith in her if she has admit her mistake and investor

would take her honesty as guarantee.10. Why is insider trading considered harmful? Should insider trading be banned if it assists in moving a stock price to a new equilibrium quickly, so that non-insiders are trading at appropriate prices sooner? It is harmful as since the information is not available to other investors, a person using such information is trying to gain an unfair advantage over the rest of the market.

Thus, it has deterred the meaning of transparency and fairness in the stock market. This would therefore hinder the economics growth and also affect the market confidence level of potential investor.I would think that it should be ban. This is because if all information is begin control by the insider trader to moving a stock price to a new equilibrium quickly so that non-insiders are trading at appropriate prices soon, investors would lose confidence in their disadvantaged position and would no longer invest. This would thus, hinder the stock market growth and affect the economic level of a country or rather, a global economic crisis.

However, if insider these insiders trade stock of their own company and report these trades to the U.S. Securities and Exchange Commission, it should not be ban. This would mean that the trading information is not kept in secret and all investors are able to find out a corporate insider’s opinion of the company.

11. If you wished to sell an investment in a company where one of your friends is an insider, or even a significant employee, should you call your friend to advise him you are about to sell? Why, or why not? I would not call my friend

to advise them if I know of the situation of my company. This would be unethical to do it as I would have made an unjust fairness to other investors as well. This would therefore affect the market confidence level of other potential investor. Also, it may be a legal issue if I would have known an insider and may be convicted for such act.

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