Find a company that you think has the potential to fail.
Wait, let’s make it a little harder: find a company that is currently valued at billions of dollars that you think has the potential to fail within five years. Explain why you think it may fail.
Next, let’s have you do it in a venue that is international, in an event sponsored by the world’s leading business magazine, The Economist.
That was the challenge facing three Okanagan College students, whose submission to The Economist’s student case competition is to be found online among 17 other submissions from business schools from around the globe, including the US, Finland, Hong Kong and Britain.
The only other Canadian team entered is from Carleton University. The American competitors include teams from Kent State, Loyola, Rutgers, the University of Colorado, Texas Tech University, and San Jose State University.
Officially the competition is called “Find a Zero: Which Billion Dollar Company Will be Bankrupt by 2020″ and is sponsored by Kerrisdale Capital Investment. (Kerrisdale Capital is an investment management firm based in New York that is known to publically engage in the practice of “short selling” securities. Short selling involves researching and anticipating declines in the value of shares in order to capitalize on the drop in price.)
The purpose of the competition is for students to research and identify business strategies used by actual companies that may be over-valued in the markets. First prize in the competition is $15,000 US. The entire prize package totals $26,000 US, including a $3,000 people’s choice award.
Coached by Okanagan College professor Yunke He (a CFA Charterholder), Karen Vandergaag and her teammates, David Langille and Curtis Loyd spent countless hours in the two-week window they had for the competition looking at various sectors, before settling on the telecommunications industry. From there, it was a review of major players until they settled on a prospect.
“The task was daunting,” explained Vandergaag. “First we needed to zero in on a sector or an industry and then search out one of the larger players and test its strength and stability, looking for issues with the company’s business strategy and its valuation, watching for disruptive forces and trends within the company’s sector.”
The trio of fourth-year Bachelor of Business Administration students put together a compelling case about why they think the company may find itself in deep financial trouble by 2020. Their argument focuses on the practice of growing through acquisitions, and its effect on a company that is already highly leveraged, participating in an industry that requires ongoing transitions to new technology to remain competitive.
“We’ll learn in May what the judges of the competition think of our choice and case submission,” says Loyd. “Hopefully our case will be compelling and will resonate with the judges.”
“It was an intense undertaking,” said Langille. “It was a great chance to put the analytical skills and knowledge developed through our studies to work.”
“Case studies such as this are an integral part of the academic experience at Okanagan College,” explained Heather Banham, the college’s Dean of the School of Business. “We encourage students to participate because, as in this instance, it gives them a chance to put what they learn to work.”
“This case competition is particularly interesting because it is a different approach, with the students asked to look for a company that may be about to experience failure,” adds Banham. “It is important to realize that their analysis is an academic exercise. The companies identified by the teams in this competition may already have plans to deal with perceived weaknesses.”