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Panda Ethanol Case Study

Panda Ethanol Case Study. Purpose of the Case Study. Illustrates how A private firm can use a reverse merger in lieu of an IPO to go public Private investment in public equity (PIPES) may be used to finance ongoing operations following the reverse merger

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Panda Ethanol Case Study

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  1. Panda Ethanol Case Study

  2. Purpose of the Case Study Illustrates how • A private firm can use a reverse merger in lieu of an IPO to go public • Private investment in public equity (PIPES) may be used to finance ongoing operations following the reverse merger • Reverse splits can be used to achieve agreed upon ownership distributions • Purchasing stock in the prior to a merger proposal can be used to influence the outcome

  3. Key Participants • Panda Ethanol • Grove Street Investors • Grove Panda LLC • Cirracor

  4. Merger Terms • One share of Panda Ethanol common for each share of Cirracor common • Cirracor shareholders to own 4% of newly issued and outstanding common stock of the surviving company • Panda Ethanol shareholders to own remaining 96% • Panda Ethanol to issue 15 million new shares through a private placement valued at $90 million • Total Panda Ethanol shares outstanding: --13.8 million existing shares --15.0 million new shares • Total Cirracor shares outstanding: 3.5 million

  5. Applying Reverse Splits

  6. Discussion Questions • Discuss the pros and cons of a reverse merger versus an initial public offering for taking a company public. • Why did Panda Ethanol undertake a private equity placement totaling $90 million shortly before implementing the reverse split? • How were the Panda Grove investment holdings used to influence the outcome of the proposed merger?

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