Terranol A Short-Seller Collapse The Party
Case study：A short-seller crashed the party
The Terranola faced several problems at the time of this article. Primarily, the Terranola was attracted by Jeremiah Hughes, a well-known hedge fund manager and short-seller. He released navigation warning that the company is overrated. He revealed the company has unsold products and its patents about to expire, as well as other negative growth forecast, put the company into the market focus. These actions made share price of Terranola sinking and its facing a deepening financial crisis. To solve these problems and regain publics and investors trust, Terranola and its CEO will have to relinquish the idea of “doing one thing really well” (Kerstetter, 2003, p.2). In order to recover the share price …show more content…
and, even the company, Terranola needs to come clean first and then dealing with the patent expiration.
Terranola is a wildly successful company with a market cap of $8.1 billion.
Its product, the Express granola-bar-making machine, is on kitchen counters across North America, and market analysts suggest that household penetration of Express machines could triple. Now, the question is how should Terranola response Jeremiah Hughes’s accusations. Hughes was bang on his target and he identified the right company, his analysis was accurate and his prediction was perfect. Many big corporates has faced this situation - share value dipped in short term and the trading in lower valuation for quite some time and when the investors start seeing the real value of the company the share price increases and valuation rise again. So it is not a panic situation for Terranola but a great time to remodel its …show more content…
business.
There are many causes inside Terranola and its business module that has made it a soft target for short sellers. Short term issue -- High stocks in warehouse. Long term concern -- Patent expiration. As a result, the action to be taken is not a single point one but a systematic strategy. As a short term solution, Terranola should call for a press conference and meet their investor to explain the following:
1. The purpose and extent of purchase made from licensee; and current and expected orders from online and other channel against those purchases. Then clean off the excess inventory.
2. Building a case for growth post expiration through incremental innovative and aggressive marketing to maintain high market share.
However, a long-term solution, the company needs form a effective and professional management team. Coming clean could create havoc for their scrip. It's best if the CMO, CFO and CEO work together in fixing the issue at hand of inventory and begin marketing campaigns about why buyers should still trust them.
A dip in the stock price for a few months wouldn't hurt; instead this would be a great time to fix the root cause of issues so that they don't hurt in the long term. Short term pain for long term gain, and the audience will realize they are dealing with a company that has integrity.
Terranola lack of innovation in the product.
For years, the company has believed in only one product and one way of revenue generation–machine and plastic pods. The lack of new revenue streams has affected the long term growth of the company. To fix this problem, the company should try to acquire a sizable health food brand. Promote the package with its Express machine. Make some offers on new bar variety from the brand. Have a more cost effective custom build machine for the brand with a different size of plastic pods. This pod is smaller and much more cheaper sourced from new vendors. These would give Terranola not for defending 'Customer Loyalty' but achieved 'Competitive
advantage'.
Moreover, Terranola should pay more concentration on its patent extension. Try the best in all ways to hold the patent. But there are more chances that it does not happen. Concentrate on pod design and have a promotion with new designs which would say its leadership in the business. Start buying back its shares in slices, convince new institutional investors who can invest in the share by promoting your new plan. One the share price start getting steady on one level , the short seller would begin to think . If Jeremiah Hughes and other shorters did not get profited much by their strategy then it would begin to be a game upside down, profit from the low valuation.
Obviously, Terranola’s business model needs a facelift now. If its not Jeremiah Hughes, it would be some other person in the near future. More than responding to investors and critics like Hughes, this is an opportunity for the organization to ensure things fall into place. This will mean the company can continue exceeding targets and outperforming the stock exchange.
The Terranola faced several problems at the time of this article. Primarily, the Terranola was attracted by Jeremiah Hughes, a well-known hedge fund manager and short-seller. He released navigation warning that the company is overrated. He revealed the company has unsold products and its patents about to expire, as well as other negative growth forecast, put the company into the market focus. These actions made share price of Terranola sinking and its facing a deepening financial crisis. To solve these problems and regain publics and investors trust, Terranola and its CEO will have to relinquish the idea of “doing one thing really well” (Kerstetter, 2003, p.2). In order to recover the share price …show more content…
and, even the company, Terranola needs to come clean first and then dealing with the patent expiration.
Terranola is a wildly successful company with a market cap of $8.1 billion.
Its product, the Express granola-bar-making machine, is on kitchen counters across North America, and market analysts suggest that household penetration of Express machines could triple. Now, the question is how should Terranola response Jeremiah Hughes’s accusations. Hughes was bang on his target and he identified the right company, his analysis was accurate and his prediction was perfect. Many big corporates has faced this situation - share value dipped in short term and the trading in lower valuation for quite some time and when the investors start seeing the real value of the company the share price increases and valuation rise again. So it is not a panic situation for Terranola but a great time to remodel its …show more content…
business.
There are many causes inside Terranola and its business module that has made it a soft target for short sellers. Short term issue -- High stocks in warehouse. Long term concern -- Patent expiration. As a result, the action to be taken is not a single point one but a systematic strategy. As a short term solution, Terranola should call for a press conference and meet their investor to explain the following:
1. The purpose and extent of purchase made from licensee; and current and expected orders from online and other channel against those purchases. Then clean off the excess inventory.
2. Building a case for growth post expiration through incremental innovative and aggressive marketing to maintain high market share.
However, a long-term solution, the company needs form a effective and professional management team. Coming clean could create havoc for their scrip. It's best if the CMO, CFO and CEO work together in fixing the issue at hand of inventory and begin marketing campaigns about why buyers should still trust them.
A dip in the stock price for a few months wouldn't hurt; instead this would be a great time to fix the root cause of issues so that they don't hurt in the long term. Short term pain for long term gain, and the audience will realize they are dealing with a company that has integrity.
Terranola lack of innovation in the product.
For years, the company has believed in only one product and one way of revenue generation–machine and plastic pods. The lack of new revenue streams has affected the long term growth of the company. To fix this problem, the company should try to acquire a sizable health food brand. Promote the package with its Express machine. Make some offers on new bar variety from the brand. Have a more cost effective custom build machine for the brand with a different size of plastic pods. This pod is smaller and much more cheaper sourced from new vendors. These would give Terranola not for defending 'Customer Loyalty' but achieved 'Competitive
advantage'.
Moreover, Terranola should pay more concentration on its patent extension. Try the best in all ways to hold the patent. But there are more chances that it does not happen. Concentrate on pod design and have a promotion with new designs which would say its leadership in the business. Start buying back its shares in slices, convince new institutional investors who can invest in the share by promoting your new plan. One the share price start getting steady on one level , the short seller would begin to think . If Jeremiah Hughes and other shorters did not get profited much by their strategy then it would begin to be a game upside down, profit from the low valuation.
Obviously, Terranola’s business model needs a facelift now. If its not Jeremiah Hughes, it would be some other person in the near future. More than responding to investors and critics like Hughes, this is an opportunity for the organization to ensure things fall into place. This will mean the company can continue exceeding targets and outperforming the stock exchange.