Kohler Case
Kohler (A) case questions
(each question carries up to 20 points) 1) Who are the winners and losers from Kohler’s 1978 stock split?
Kohler Co. has always been a private company. CEO and Chairman Herbert Kohler stated that this private status contributed greatly to the success of Kohler Co. He mentioned several arguments to back up this statement. First of all, a privately owned company is not required to publish financial and non-financial information about its operations to the public. Herbert Kohler believed these financial statements would give away to much information to competitors. Secondly, some long term investment decisions would be hard to explain to outside shareholders. Herbert Kohler pointed to the decision of Kohler Co. to invest in their cast iron technology, while other competitors focused on other materials. Also the fact that Kohler Co. invested in a luxury resort and the investments made in their power business would be hard to explain to outsiders. Therefore, Herbert Kohler valued the privately owned status of Kohler Co. highly, and he was determined to prevent the company going public. But in 1978, there were already 400 outside shareholders. When the amount of outside shareholders numbered 500, the Securities and Exchange Commission required Kohler Co. to make detailed financial disclosures. This is why the reverse stock split was initiated. For every 20 shares, a shareholder would receive one new share. Shareholders that had less than 20 shares were offered to sell these shares back to Kohler Co. or to extend their investment to receive at least 1 full share. Many minority shareholders decided to sell their shares back to Kohler Co. which reduced the amount of outside shareholders significantly.
There were several different stakeholders involved in this stock split. First of all there was Herbert Kohler, who initiated the reverse stock split. As stated, he wanted to make sure that Kohler Co. remained a privately owned company.
(each question carries up to 20 points) 1) Who are the winners and losers from Kohler’s 1978 stock split?
Kohler Co. has always been a private company. CEO and Chairman Herbert Kohler stated that this private status contributed greatly to the success of Kohler Co. He mentioned several arguments to back up this statement. First of all, a privately owned company is not required to publish financial and non-financial information about its operations to the public. Herbert Kohler believed these financial statements would give away to much information to competitors. Secondly, some long term investment decisions would be hard to explain to outside shareholders. Herbert Kohler pointed to the decision of Kohler Co. to invest in their cast iron technology, while other competitors focused on other materials. Also the fact that Kohler Co. invested in a luxury resort and the investments made in their power business would be hard to explain to outsiders. Therefore, Herbert Kohler valued the privately owned status of Kohler Co. highly, and he was determined to prevent the company going public. But in 1978, there were already 400 outside shareholders. When the amount of outside shareholders numbered 500, the Securities and Exchange Commission required Kohler Co. to make detailed financial disclosures. This is why the reverse stock split was initiated. For every 20 shares, a shareholder would receive one new share. Shareholders that had less than 20 shares were offered to sell these shares back to Kohler Co. or to extend their investment to receive at least 1 full share. Many minority shareholders decided to sell their shares back to Kohler Co. which reduced the amount of outside shareholders significantly.
There were several different stakeholders involved in this stock split. First of all there was Herbert Kohler, who initiated the reverse stock split. As stated, he wanted to make sure that Kohler Co. remained a privately owned company.