Essay on Rosetta

4242 Words Nov 2nd, 2014 17 Pages
ROSETTA STONE: pricing the 2009 IPO Teaching Note

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 its 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 this
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This teaching note may be assigned as reference material for the valuation analysis required in this case.

Supplementary video in support of this case is available from the Darden Publishing channel on YouTube by using the links provided in the case. There are three video exhibits available for the instructor’s use:

Video Exhibit TN1. Epilogue 1 is a designed for use at the end of class as a synopsis of the pricing decision or as an introduction to a discussion on the IPO underpricing phenomenon. It features interviews with Tom Adams, CEO, Rosetta Stone, Inc. and Phil Clough, Managing General Partner, ABS Capital Partners.

http://www.youtube.com/watch?v=3sViTF2AgxU

Video Exhibit TN2. Epilogue 2 is a short clip of Tom Adams, CEO of Rosetta Stone, discussing the industry classification of Rosetta Stone.

http://www.youtube.com/watch?v=jPx3dNmoyR8

Video Exhibit TN3. Epilogue 3 is a designed for use at the end of class to summarize the stock price history for Rosetta Stone’s first year of trading.

http://www.youtube.com/watch?v=1rdx2n3zNVc

Teaching Plan

1. What is going on at Rosetta Stone?

The opening question is designed to allow students to put up the relevant background of the important managerial decisions facing Rosetta Stone management. In particular, the discussion should focus on the decision to go public and the price at which Rosetta Stone shares should be sold.

2. Tell me about the

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