Case Name :      MoGen, Inc.

Authors :           Kenneth Eades, Alex Holsenbeck

Source :             Darden School of Business

Case ID :           UV1054

Discipline :        Finance

Case Length :    15 pages

Solution Sample availability : YES

Plagiarism : NO (100% Original work)

In 2006, Merrill Lynch became the lead book runner for a $5 billion convertible bond issue for MoGen, Inc., which was the single-largest convertible bond issuance in history. Merrill Lynch’s Equity Derivatives Group needed to convince MoGen’s management of the best coupon rate and conversion premium for MoGen and the potential investors in the issue. This pricing decision requires students understand the concept of valuing a convertible as the sum of a straight bond plus the conversion option. Valuing the conversion option as a call option requires the estimation of the Black-Scholes model, with the volatility being a particularly challenging input. The case is designed for students who already have a basic knowledge of bond valuation and option-pricing principles and works well with undergraduate, MBA, and executive education audiences.