Strategic Capital Management - Case Study Example

Strategic Capital Management, LLC Memo s of Strategic Capital Management, LLC Dan Lionel, Public Relations Liaison Date: May 12, 2012 Subject: Company analysis Introduction Strategic Capital Management, LLC is a strategic contemporary company that operates in the management of hedge funds. Developed in 1998, the company is a professional firm that manages its investments with the view to sustaining its profitability. The company prides itself in the quality of its products thus its sustained profitability throughout its existence. The limited liability company works closely with both its investors and the target market in order to obtain the required market information thus invest its resources strategically in order to enhance its profits. The company just as any other invests in liquid assets most of which sell efficiently thus safeguarding the interests of the company’s investors. The company acts as the bridge between the investors and the market. The company identifies appropriate investments opportunities thus consolidates the required funds. This way, the company acts as the intermediary between the prospective investors and the stocks. The company manages its investments by ensuring that it obtains the optimal profits from every of its investments. Prior to opening up the company, the sole prospector, Elena King carried out effective research in order to identify an appropriate market niche. After consulting numerous gurus such as Henry Blogett, Mary Meeker and Merrill Lynch, the proprietor opted for the contemporary e commerce. Strategic Capital Management, LLC therefore operates online often looking for investment opportunities on the online platform and on companies that trade on online products. Analysis, evaluation and synthesis of identified industry SCM operates in a precarious industry. The company has neither the finances nor products of its own. This implies that it acts as an intermediary between the investors and the companies. As such, the company must identify its products and services effectively in order to safeguard the profitability of its investors. This way, it safeguards its own longevity and profitability. This requires the identification of appropriate companies that require investors thus managing the products and services of such companies in order to sustain their profitability since this ensures that the investors make profits on their investments. Elena did her investments carefully after considering the position of its target companies when she opted to invest her capital in Ubid and creative computers, the proprietor had considered numerous factors about the two companies and their products thus guaranteeing the profitability of such. She therefore identifies appropriate way of raising capital for both companies in order to enhance their operations. The company’s initial capital was $ 20 million dollars which the proprietor sought to manage effectively in order to safeguard the profitability if the company. As such, the company has diverse products and charges varied service costs. The company seeks to generate 10% annual returns on the capital. However, the company has minimal market exposure. As such, company must develop appropriate products. Key among such is a 2% service for the products it will manage for its clients and an additional 20% as an incentive fee. Another equally important aspect of the company is that it required its investors to leave their money with the company for two consecutive years. Such is a vital requirement that ensures that Strategic Capital Management, LLC retains its liquidity thus enjoying a sustained flow of finances, the company therefore greater control of the money a feature that provides it with the ability to budget for its investments. Ubid and creative computers Strategic Capital Management’s greatest opportunity was Ubid, an internet-auctioning firm. The hedge fund firm decided to invest in the varied products of the company a decision that foster the growth and profitability of the two. Initial public offer is a strategic undertaking for companies as they sell their shares to the public in order to raise capital. Strategic Capital Management thus took over the management of such investment decisions for the company a move that made profitability to the company besides raising adequate capita for the online auctioning firm. The internet offers businesses a large target market thus heightening their chances for profitability. However, Ubid and the creative computers had a disruptive past, as the management of the company could not raise adequate capital. By seeking the services of Strategic Capital Management, the company sought to harmonize its management hurdles besides raising adequate capita to enhance its profitability. SCM would organize appropriate mechanisms to raise adequate capital by attracting investors. Additionally, it would sustain the management of the company in order to safeguard both the profitability and the longevity of the company. Among the easiest ways of raising adequate capital for the company was the sale of its shares. A share is a proof of ownership. As investors buy shares, they stand to enjoy varied products and services besides enjoying the flexibility of trading their shares at any time. SCM thus sought to develop the company by first raising adequate capital then developing its other products in order to enhance the investor confidence on the products of the company. The initial public offer was therefore the most appropriate undertaking that would provide the online auctioning company with a chance to rebrand and position itself differently. Additionally, it offered SCM an opportunity to portray its genius in hedge fund management thus attract adequate investors and guarantee the investor confidence. This would ensure that the company’s other products enjoyed similar success in the future. The management of Ubid and creative computers would be instrumental in the success of SCM. Elena needed to manage the company’s assets and liabilities appropriately in order to foster its growth. The shares of Ubid premiered at a cost of $ 15. Prior to the IPO, the company had carried out an effective marketing of the company and its affiliate products thus attracting the desired investor attention. The company sold 1.817 shares thus raising $ 25.4 million after subtracting $1.9 million to SCM as underwriting fees. This portrayed the success the two companies would enjoy because of the partnership. While the initial public offer raised adequate capital for the company, it also presented more responsibility for SCM since it had to manage the assets and the products of the two companies in order to sustain both the investor confidence and interests in the company’s products. When Ubid began trading at the stocks market, its shares traded at $38. This doubled the cost of the company’s IPO thus raising the value for the company and the investor confidence as SCM enhanced speculation on the value of the company thus raising the value of company’s share prices. The company had an outstanding 9.15 million shares, which it sold once the value of shares had doubled thus raising a market capitalization of $439 million. The company enjoyed increased liquidity as the capital inflow increased. With the increased capital, the company diversified its products exploiting the features of the internet to enhance its market share. The internet expands the target market as the company began to target both the global market and the global investors. While Ubid enjoyed increased profitability owing to the new lease of life arising from the IPO so was its counterpart, the creative computers that also had its share of successes as it diversified its products thus increasing its market share. While the shares of the two companies increased in value, the two companies had varied performances in the market. Creative computers remained profitable as it diversified its products and services. Ubid on the other hand began experiencing poor performances as its products performed poorly. The company for example had a pretax loss of $ 1.1 million. Such was a negative trend that would derail investor confidence thus resulting in sustained poor performance. As such, the company had to redesign its products thus position itself strategically in order to revive the profitability desires of the company. Elena, whose company manages the hedge funds invested in the company, had to devise appropriate ways of reviving the products and services of the company in order to enhance the profitability of the company. Do so required sustained market research and the analyses of the varied products thus revising and repositioning them appropriately (Marcel& Edward 21). Conclusion and reconditions In retrospect, SCM just as any other company requires both profitability and longevity. As such, Elena must employ specific strategies in order to achieve the two. By taking over the management of Ubid and Creative computers, SCM has an effective opportunity of raising its reputation thus enhancing its profitability. The success of the two companies would resonate in the success of the hedge fund management company. This therefore places the responsibility of managing the assets and products of the two companies on Elena’s shoulders. As the discussion above portrays, the company’s products continued to incur loses despite the increase in the values of its shares. Such a trend would heighten the speculation on the future of the company thus discourage investment on the company’s shares. SCM must therefore revolutionize the products of the company and position it strategically in order to enhance its profitability. In order to do this, the management of the company must implement the following recommendations: I. Diversify the products of the company. Diversification is an effective way of increasing the company’s market share thus heightening the company’s chances of profitability. An increase in the company’s products implies that the company targets varied markets. This way, the profits of a single product can overcome the losses of the other thus enhancing the company’s profitability. II. Exploit the features of the internet in increasing the company’s target market. Ubid and creative computers are online companies. As such, the two enjoy a large target market. The internet has effective platforms that overcome the geographic barriers. This implies that the company can attract foreign investors thus increasing the value of both its shares and products. Work cited Marcel, Kahan & Edward, B. Rock. Hedge Funds in Corporate Governance and Corporate Control. Washington: University of Pennsylvania, 2007. Print. Read More