Case Study: Anacott Steel

10. Wildman received financing in order to assume majority of control/have a major stake in Anacott Steel by purchasing and possessing majority shareholding in the company.

11. – Gekko tells Bud to purchase a large number of shares from Anacott Steel, when the market opens. Gekko purchases more shares utilising his offshore accounts. When the share price reaches $50, Bud informs his colleagues of the potential of Anacott Steel, getting their clients to purchases shares from the company. Eventually, several companies purchase Anacott Steel shares. This is manipulating the market via securities fraud.

– This minimises the remaining shares available to Wildman for purchase. Thus, to assume control of Anacott Steel as he initially desired,

– On the contrary, asset stripping can be considered good business as it assists in deleveraging the business. Disposing of subsidiaries that struggle financially and do not accumulate significant profit will allow the business to reduce debts whilst simultaneously refocusing resources on other, more profitable departments or businesses in order to increase overall profit. Concurrently, staff may be sent to beneficiating processes to be reskilled and work in new environments.

– The ethical nature of asset stripping is thus determined by the reason for the action.

15. – The ‘bureaucrats’ have invested too little in Teldar stock to be overly concerned with the performance of the business and accompanied growth.

– Management follows a work to rule philosophy even at the expense of other stakeholders, such as employees and shareholders. They do not have the drive to succeed or change processes to generate more profit, simply because they receive large salaries and benefits for doing merely what their contracts

– Investments in other businesses indicate that management is only concerned with earning a salary and not the earnings of the shareholders themselves. If they owned a greater stake, it would be their money at risk as well, encouraging and driving a stronger work ethic. Currently, it would be classified as a moral hazard.

16. – Leverage or gearing refers to a company’s debt in relation to its equity. It indicates to what degree the company is financed by debt rather than own capital.

– The higher the gearing, the higher the risk of the business, thus discouraging investors from investing.

– The company being leveraged or highly geared suggests that it is financed mainly though debt as opposed to equity. The risk is high as the company may be unable to cover its debts in the long term. Thus, if not cautious, the company may become insolvent. Furthermore, the company may be vulnerable to economic downturns; incurring high amounts of accumulated interest expense on liabilities which results in decreased profit. High gearing repels investors as the Return on Investment/earning potential may not be worth the associated risk of the