FINANCE-Consider the case of Biovail, the case in question for this Assignment.

QUESTION

Week 2 Case assignment:
Consider the case of Biovail, the case in question for this Assignment.
Biovail is suing hedge fund SAC Capital and independent research firm
Gradient Analytics for manipulating its stock price downward. Is this suit
justified? What is the role of short sellers in the economy? In real-world
markets, there are many impediments to short selling and to bringing out
negative information. These constraints affect prices and overall market
efficiency.
To complete this Case 1 Assignment, you will review the Selling Biovail
Short case from the Harvard Business Publishing website to analyze the
case further.
Case
Study

Baker, M. P., Lombardi, C. J., & Sesia, A. (2006). Case
study: Selling Biovail short (HBS Case Study No. 9-207-071). Retrieved
from Harvard Business Publishing.hbsp.harvard.edu/cbmp/access/37227892″ title=”Case Study: Selling Biovail Short”>https://cb.hbsp.harvard.edu/cbmp/access/37227892

Access the
Coursepack from the Harvard Business Publishing website to download the cases
for this course. For this week, you will review and focus on Selling Biovail
Short (HBS Case No. 9-207-071).
Activity
For this activity:

Access the Coursepack from the Harvard Business
Publishing website found in this week’s Learning Materials.
In the Coursepack, you have access to all of the case
studies for this course. You will need to purchase and download all of
these case studies. Make sure you download and save your case studies in a
reliable location on your computer for ease of use and access.
Once you make your purchase and download, review the Selling
Biovail Short case study HBS Case 9-207-07 for this week’s Assignment.

Instructions
To
complete this Assignment:

Write a short report (not more than 5 pages,
double-spaced), developed around the following questions:

Evaluate Melnyk’s strategy. What are the objectives?
What would you do if you were in his situation, prior to the lawsuit?
How do investors gather information about companies
like Biovail? What are the sources? How does this information get into
stock prices?
What are the allegations? How should SAC respond in
this situation? Should they change their investment strategy going
forward? How should Gradient Analytics respond? Should they change their
approach in the future?
Imagine you have a firm conviction that Biovail is 10%
overvalued today, i.e., the present value of their future equity cash
flows is less than the firm’s market value. Would you take a short
position in the stock? Why?
What are the implications of short sales constraints
for stock prices?

ANSWER:

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