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    Rosetta Stone: Pricing the 2009 IPO

    Schill, Michael J. ; Papireddy, Suprajj ; Adams, Tom ; Clough, Phil

    • Reference: DARDEN-F-1613-E

    • Number of pages: 21

    • Publication Date: Dec 21, 2009

    • Fecha de edición: May 6, 2016

    • Source: Darden University of Virginia (USA)

    • Type of Document: Case

    • Industry Setting: Education

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    Description

    This case examines the April 2009 decision of Rosetta Stone management to price the initial public offering of Rosetta Stone stock during one of the most difficult periods in capital-raising history. The case outlines Rosetta Stone’s unique language learning strategy and the associated strong financial performance. Students are invited to value the stock and take a position on whether the current $15 to $17 per share filing range is appropriate. The case is designed to showcase corporate valuation using discounted cash flow and peer-company market multiples. The epilogue details the 40% first-day rise in Rosetta Stone stock from the $18 offer price. With such a backdrop, students are exposed to one of the well-known finance anomalies-the IPO underpricing phenomenon-and are invited to critically discuss various proposed explanations.

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    Keywords

    corporate valuation initial public offering multiples