Case Solution for Toyota’s Innovative Share Issue (2015)

Case Solution & Analysis for Toyota’s Innovative Share Issue (2015) by Emir Hrnjic.

Complete Case details are given below :

Case Name :      Toyota’s Innovative Share Issue (2015)
Authors :           Emir Hrnjic
Source :              Ivey Publishing
Case ID :           9B16N008 / W16373
Discipline :        Finance
Case Length :    13 pages
Plagiarism : NO (100% Original work)
Description for case is given below :
In June 2015, the Toyota Motor Corporation’s annual shareholders’ meeting included a proposal regarding Toyota’s new share issue. Named “Model AA” shares after the company’s first passenger car, the shares would offer investors new hybrid securities. This proposal created a lot of controversy among existing shareholders. Although President Toyoda claimed that no one would be disadvantaged by these shares, it remained unclear how many shareholders had confidence in this assurance. The share issue, which would potentially comprise up to 5 per cent of Toyota’s total outstanding shares, would require the support of a two-thirds majority of shareholders. The new shares looked like ordinary shares with a “lock-up” period or preferred shares with voting rights. At the same time, Model AA shares resembled a convertible debt issue with voting rights (with a conversion ratio to be determined later). It was time to vote on the approval of Toyota’s new share issue, but the following questions lingered in the shareholders’ minds: What exactly was the difference between Model AA shares and ordinary shares? What was the difference between Model AA shares and bonds (or convertible bonds)? Finally, if the vote was approved, how should Model AA shares be priced?
 
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