1. Do you agree with the Mondavi family’s decision to publicly list the company’s shares? What are your major concerns with how this could impact the business? What are the major benefits?
2. How would you recommend Robert Mondavi respond to the market’s current assessment of the company? What types of investors are most likely to be interested in the company? How would you best target those investors?
3. What do you think could have led to the rapid fall in the share price?
1. Clearly for Mondavi, going public is the only way to secure large financing for his business. However, the decision that Mondavi made to increase the scale of business is debatable. While Mondavi can be conservative to stay on the same scale and try to grow organically, Mondavi can also be risk taking and gather money from the public.
With regard to the wine market prospects, there are two sides of the argument which favour and unfavor the wine market. It is thus difficult to judge from the wine market aspects.
Ultimately it is the Mondavi’s personal preference to take the riskier and higher reward decision.
2. The market assessment of the company seems to value MOND to have a pessimistic future and worth a lot less than when it is first public offering. Reputable business magazine, Forbes, look down on the prospects of MOND, which provide strong a strong reason for financial reward seeking investors not to invest in MOND. It is likely that investor who ultimately purchases MOND’s shares and hold, as noted from the low free share turnover after week 7, are people who believes in the MOND’s business vision.
MOND could release press in respond to convince the public the future prospects of MOND. For investors who are still believer of the company should be informed that the company will continue to grow as what it was promised and will not go through major restructuring to produce a better financial report.
3. Mondavi’s IPO day is on June 10 1993. There are two articles released by The Wall Street Journal and Forbes, on April 26 and June 7 respectively, both lookdown on the prospects of MOND and the entire wine industry. They played an important role to discourage financial reward seeking investors to buy MOND’s shares and makes them feel sceptical about the value of MOND.
High share turnover on the first day and respectable closing price indicates a successful IPO. However, the market thinks the value of MOND is overpriced and no later investors are willing to pay a price greater than its current market price. This trends continues till week nine despite the free share turnover is low. It is still unclear when the share price will stop falling.
One other major reason for the continuing falling share price is that the Mondavi management team did not response to their stock price. This result in investors losing their confidence with the company.