Memorandum

This memorandum is written to assist the decision making about to raise capital for further growth and recapitalize the ownership structure of TRX thorough Initial Public Offering. The analysis is examined from two scenarios. One is that TRX keep on IPO at lower price of $9 per share; another is that it postpones the IPO in 2006. I would project the IPO price of 2005 and 2006, respectively based on the management plan. According to the TRX’s balance sheet and financial data, TRX was a very young technology-integration company which founded in 1999. By 2004, TRX generated $113. m in total revenues and the ensuing half year it generated about $62m which was already ahead of the last year’s pace. Not only had the top-line revenue growth in industry, the company created the surprised high mean margin growth of EBITDA which was 188. 8% from 2002 to 2005 as well. (Figures show in Appendix 1) Although TRX still represented the negative net income right now, the company must have tremendous profit potential to be expected, because TRX will completely remove low-margin business in 2008 in order to generate strong cash-flow and the more of higher-margin business would stems from TRX’s four top clients. Thus, in order to fuel the rapid growth of the business, TRX should be considered as a good candidate for going public. Nevertheless, TRX first failed to go public in 2000 attributed to the overall stock market conditions were awful since the dot-com bubble burst in the late 1990s. From travel industry condition performance, TRX encounter the recession of travel industry, which affected its fortunes since the company closely related with the overall health of the industry. From the overall stock market conditions, the performance of NASDAQ was volatility throughout 2004, even dropped a low in August 2004 and thereby the pricing of IPO was poor when the company prepare to IPO. Even though the rebounded of stock market in the first half of 2005, the market conditions still acted unstable with weak performance of IPO. Once again, TRX experienced the bad news of industry during its road show. These broader market climates were seemed like unfavorable for the company’s IPO. In reposed to the first filed IPO, TRX turned to raise capital from outside strategic investor Sabre with issuing 15m convertible note and another 5m was from its original investors BCD and Hogg Robinson in order to support company’s growth until it attempted the second time to IPO. Actually, Going public gives these investors the opportunity to exit, proving an attractive harvest strategy especially when the TRX’s stock price closed at a higher price in the post-IPO. However, the final price range of IPO offered by CSFB was $9 per share which was lower than the price Sabre paid for its share. Here, I use comparable analysis to estimate the IPO price based on the management plan in 2005 and 2006, respectively. Since a perfectly comparable company can’t be found, I chose primary sectors’ multiples which most close to TRX with online travel and payment processing. Moreover, the average median multiples are calculated the reason I used median multiples over mean is that more accuracy projections will estimated without outliners involved in mean. Also, I chose the next years’ EBITDA and net income, respectively due the stock prices reflect the present value of future earnings. He company could offer the lender partial ownership in the venture in exchange for loan principal by swapping their debt for equity. The improves the profitability of the venture by lowering debt service payments while lowering debt liability on the balance sheet and replacing it with equity. Also, the lender is trading fixed-rate debt for equity with a potentially higher total return. If the firm is doing very well , and lenders fell that the return on investment will likely be better with equity position, this becomes an attractive option for debt holders. Memorandum My background and interests are fairly diverse and require a more in depth explanation and presentation and this is the rational behind my presentation of this exploratory memo. Hopefully, this memo will clearly address all issues in a manner that will shed light on my background. My primary academic focus is economics and international trade and I approach these avenues in a manner that is significantly different from the way many other people may approach said disciplines. I am a foreign national who was born in Korea and I believe this gives me a different perspective on international trade and economics as I have a great deal of experience seeing the actual â€Å"international† aspect of trade and economics while many people who have limited experience with foreign economies may have a limited understanding in regards to how it works abroad. More than just interested in things that involve politics and the economy, I have also invested a great deal of my time in charitable pursuits. I served as vice President of my church and from this position I was able to invest a great deal of time in charitable pursuits. These pursuits included helping out with individuals who were infirmed and in need of assistance. This experience proved very rewarding on levels that were professional, personal and spiritual. I also place a significant emphasis on my life towards the pursuit of athletic excellence. In particular, I enjoy skiing and snowboarding and have invested a great deal of time developing a proficiency in these sports. A healthy mind only remains healthy when the body that supports it is equally strong so I take the development of an athletic cardiovascular system very seriously. An inability to properly communicate remains one of the more damaging aspects that could undermine an individual’s ability to achieve maximum potential in the workplace. More than anything, I would prefer to develop the enhancement of my grammar, syntax and communicative language in a manner that would effectively be quite impressive to the reader. This does not mean that I would like to master the English language for the sole purpose of being able to misrepresent my knowledge on a particular subject by burying and hiding a lack of knowledge within the confines of excellent grammar and syntax. What I wish to do is to make my knowledge of a particular subject matter and my ability to communicate my knowledge, feelings and ideas within the confines of the business community in such a way that it becomes clear I have a solid and serious pragmatic ability to apply my knowledge on the subject. This is not to say, however, that I have extremely limited experience in business or professional communication. On the contrary, I have a fairly expansive degree of experience with business communication. I do, however, realize my limitations in this area and I will to expand my skills and capabilities in order to eliminate any limitations I may have. While some may assume (erroneously) that the Snowboarding Club that I served as president of would be exclusively a leisure pursuit, this is about as silly of a statement as stating the multi-million dollar snowboarding industry is nothing more than a leisure pursuit. As President of this club I would perform my duties as professionally as I would have performed the same duties for a more ‘established’ club such as an economics club, etc.   As part of my duties as President, I would routinely communicate with various entities and individuals by way of traditional business writing (I.E. pen and paper) and by way of electronic communication (email, etc) In terms of why I am taking this course, the primary reason is that the course is required. So, yes, it is a mandatory course designed to facilitate my graduation, but that is not entirely the whole case. There is much more to it than merely taking a course designed with one sole goal of graduating and receiving a degree. To do this without having developed any real or significant skill would be ludicrous and totally self defeating in terms of the way such an attitude would undermine my entire education. So, regardless of the administrative reason why I am taking this course, all courses are electives as I have elected to attend the University in order to develop my professional skills. In other words, my attendance in this course is primarily to learn the material and then take the material and develop it into functional skills that can carry into the workplace and in life in general.                                                                Memorandum This memorandum is written to assist the decision making about to raise capital for further growth and recapitalize the ownership structure of TRX thorough Initial Public Offering. The analysis is examined from two scenarios. One is that TRX keep on IPO at lower price of $9 per share; another is that it postpones the IPO in 2006. I would project the IPO price of 2005 and 2006, respectively based on the management plan. According to the TRX’s balance sheet and financial data, TRX was a very young technology-integration company which founded in 1999. By 2004, TRX generated $113. m in total revenues and the ensuing half year it generated about $62m which was already ahead of the last year’s pace. Not only had the top-line revenue growth in industry, the company created the surprised high mean margin growth of EBITDA which was 188. 8% from 2002 to 2005 as well. (Figures show in Appendix 1) Although TRX still represented the negative net income right now, the company must have tremendous profit potential to be expected, because TRX will completely remove low-margin business in 2008 in order to generate strong cash-flow and the more of higher-margin business would stems from TRX’s four top clients. Thus, in order to fuel the rapid growth of the business, TRX should be considered as a good candidate for going public. Nevertheless, TRX first failed to go public in 2000 attributed to the overall stock market conditions were awful since the dot-com bubble burst in the late 1990s. From travel industry condition performance, TRX encounter the recession of travel industry, which affected its fortunes since the company closely related with the overall health of the industry. From the overall stock market conditions, the performance of NASDAQ was volatility throughout 2004, even dropped a low in August 2004 and thereby the pricing of IPO was poor when the company prepare to IPO. Even though the rebounded of stock market in the first half of 2005, the market conditions still acted unstable with weak performance of IPO. Once again, TRX experienced the bad news of industry during its road show. These broader market climates were seemed like unfavorable for the company’s IPO. In reposed to the first filed IPO, TRX turned to raise capital from outside strategic investor Sabre with issuing 15m convertible note and another 5m was from its original investors BCD and Hogg Robinson in order to support company’s growth until it attempted the second time to IPO. Actually, Going public gives these investors the opportunity to exit, proving an attractive harvest strategy especially when the TRX’s stock price closed at a higher price in the post-IPO. However, the final price range of IPO offered by CSFB was $9 per share which was lower than the price Sabre paid for its share. Here, I use comparable analysis to estimate the IPO price based on the management plan in 2005 and 2006, respectively. Since a perfectly comparable company can’t be found, I chose primary sectors’ multiples which most close to TRX with online travel and payment processing. Moreover, the average median multiples are calculated the reason I used median multiples over mean is that more accuracy projections will estimated without outliners involved in mean. Also, I chose the next years’ EBITDA and net income, respectively due the stock prices reflect the present value of future earnings. He company could offer the lender partial ownership in the venture in exchange for loan principal by swapping their debt for equity. The improves the profitability of the venture by lowering debt service payments while lowering debt liability on the balance sheet and replacing it with equity. Also, the lender is trading fixed-rate debt for equity with a potentially higher total return. If the firm is doing very well , and lenders fell that the return on investment will likely be better with equity position, this becomes an attractive option for debt holders.