Business Studies Course - Investment
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Bankrupcy report - Reading

Read this article from the latest issue of Stock Dealer Today<\/b> magazine, and then answer the questions opposite.

Wagnarox shuts up shop.

Struggling IT firm Wagnarox finally gave up the ghost last week and called in the receivers. The news came as a shock to many city analysts who were expecting the company to arrange a refinancing package with its creditors.

Wagnarox was founded in 1996 by Jerry Wagnarox, who left college to develop his brainchild - an internet technology that allowed computers to display television online. Unfortunately, the company's business model did not take into account that most people did not have the technology at home to make full use of what Wagnarox was offering. Abel Springer, head of the banking consortium which was Wagnarox's main backer announced yesterday "Market research now shows that most people do not want their PC to be a television. They have a TV in the lounge that does the job better and more cheaply."

Mr Springer pointed out that the consortium had always considered Wagnarox to be a speculative investment, and he mentioned that the consortium had hedged their bets by making an equivalent investment in American Onliner - a huge but more normal internet firm. On balance, Mr Springer thought that the consortium would break even.

Jerry Wagnarox complained that the company had been badly hit by a bear market in its shares, which had made it very expensive for the company to take on new debt by pledging equity as collateral. Recent months have seen the share price of the company fall from a high of 2.30 per share, to yesterday's low of 1.7p.

Because the company has got almost nothing that creditors can sell, they have no way to get their money back again - another example of the dangers of trading in the hi-tech sector.

 

1. Wagnarox is the name of a person and a company.
a. true.   
b. false.   

2. Wagnarox was not expected to fail when it did.
a. true.   
b. Reserved.   

3. Mr Springer worked for Wagnarox.
a. true.   
b. false.   

4. People did not want Wagnarox's product.
a. true.   
b. false.   

5. Wagnarox wanted to replace computers with TVs
a. true.   
b. false.   

6. Some of Wagnarox's creditors thought the company might fail.
a. true.   
b. false.   

7. Wagnarox was finding it hard to borrow money.
a. true.   
b. false.   

8. Wagnarox shares are now worth 1.7p
a. true.   
b. false.   

ANSWERS