Kmart and ESL Investments (A)

Stuart C. Gilson; Sarah  Abbott

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Case | HBS Case Collection | August 2008 (Revised May 2009)

Kmart and ESL Investments (A)

by Stuart C. Gilson and Sarah Abbott

Abstract

A major bankrupt retailer is poised to emerge from Chapter 11. Two activist hedge funds ("vulture investors") will own over 50% of reorganized Kmart's common stock, based on prior investments in Kmart's debt claims, and an infusion of new equity financing. The Chapter 11 process has generated both costs and benefits for the company. Its future profitability, and the value of the reorganized business, are both highly uncertain.

Keywords: Restructuring; Capital Structure; Insolvency and Bankruptcy; Investment; Investment Activism; Valuation; Financial Services Industry; Retail Industry; United States;

Format: Print

24 pages

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Citation:

Gilson, Stuart C., and Sarah Abbott. "Kmart and ESL Investments (A)." Harvard Business School Case 209-044, August 2008. (Revised May 2009.)

About the Author

Stuart C. Gilson

Steven R. Fenster Professor of Business Administration

Finance

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Supplement | HBS Case Collection | December 2017 (Revised April 2018)

Tesla Motors (B): Merging with SolarCity

Stuart C. Gilson and Sarah L. Abbott

In 2016, electric car manufacturer Tesla announced that it was making an offer to acquire solar panel manufacturer SolarCity in an all-stock offer worth $2.6 billion in Tesla stock. Tesla’s co-founder and CEO, Elon Musk, believed that the merger would generate significant cost and revenue synergies, based on his vision of the future of transportation, energy storage, and a “green” economy. However, most Wall Street analysts were highly skeptical of the deal, voicing concerns that the merger would burden Tesla with excessive debt and that Musk was using the deal to advance his personal interests (at the expense of public shareholders) and bail out Tesla. Concerns were raised over possible conflicts of interest, given that Musk owned over 20% of the stock, and sat on the board of directors of both companies. The viability of the merger was also questioned given that neither Tesla nor SolarCity had ever been profitable.

Keywords: valuation; M＆A; M＆A Valuation; Investing; equities; Equity; Valuation; Mergers and Acquisitions; Auto Industry; Energy Industry; United States;

Citation:
Gilson, Stuart C., and Sarah L. Abbott. "Tesla Motors (B): Merging with SolarCity." Harvard Business School Supplement 218-038, December 2017. (Revised April 2018.) View Details

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Case | HBS Case Collection | April 2018

Sabine Oil & Gas Corporation

Stuart C. Gilson, Kristin Mugford and Sarah L. Abbott

In 2016, a trial began to determine the future of Sabine Oil & Gas Corporation’s $3 billion chapter 11 reorganization plan. The plan called for first and second lien secured creditors to receive new claims representing approximately 98% of the reorganized company’s enterprise value, leaving unsecured creditors, owed $1.4 billion, to recover less than two cents on the dollar. The plan had the support of the secured creditors, but unsecured creditors were strongly opposed. At the heart of the unsecured creditors’ objections to the plan was a dramatically different view on valuation. How much were Sabine's oil and gas reserves worth today? How much were they worth at the time Sabine filed for chapter 11? And, based on these valuations, what was a fair recovery for Sabine's creditors?

Keywords: corporate reorganization; chapter 11; oil ＆ gas; restructuring; bankruptcy; bankruptcy reorganization; Insolvency and Bankruptcy; Energy; Restructuring; Valuation; United States;

Citation:
Gilson, Stuart C., Kristin Mugford, and Sarah L. Abbott. "Sabine Oil & Gas Corporation." Harvard Business School Case 218-004, April 2018. View Details

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Case | HBS Case Collection | December 2017 (Revised March 2018)

Tesla Motors (A): Financing Growth

Stuart C. Gilson and Sarah L. Abbott

The case analyzes the equity market value of Tesla Motors, the electronic car company founded and led by Elon Musk. Wall Street analysts are wildly divided on the future growth prospects for this company, and analysts’ one year share price targets range from $160 to $500. The case explores in detail the valuation case made by two analysts covering Tesla, one a bull on the stock and one who is bearish. Students are asked to consider the arguments and the analytical approaches employed by each. Is Tesla a good investment or not?

Keywords: valuation; valuation methodologies; Investing; equities; Public Equity; Finance; Valuation; Equity; Auto Industry; Energy Industry; United States;

Citation:
Gilson, Stuart C., and Sarah L. Abbott. "Tesla Motors (A): Financing Growth." Harvard Business School Case 218-033, December 2017. (Revised March 2018.) View Details

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Kmart and ESL Investments (A)

Abstract

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