THE MAJOR EVENTS :: Business and Management Studies

THE MAJOR EVENTSThe graphs below summarise the fluctuations in the share price andshareholders returns of Vodafone group, as a result of two majorevents which occurred in mid February, 2004 and mid November of thesame year. On the 22nd 0f January 2004, AT&T Wireless, the third largest spryphone group in the US, put itself up for bargain but as shown above in anatomy1, this does non seem to have affected the share price or volume of trading as in that respect was no significant upward or downward trend in thesetwo areas. This can lead to an assumption that the market isinefficient as it did not respond to the information or that investorswere not expecting Vodafone to bid for AT&T Wireless because Mr Sarinhad told investors and analysts that he was happy with Vodafonesjoint venture with Verizon, the leading mobile phone operator in theUS.Had Vodafone succeeded in acquiring AT&T Wireless, it would have hadto sell its profitable stake in Verizon back to its partner, VerizonCommunica tions - a prospect that did not appeal to its shareholdersand so may be why the new information was not relevant to theVodafone.9th February 2004, saw the Vodafone Group Plc announcing that it will reach out to monitor developments in the US market and is exploringwhether a potential transaction with AT&T Wireless is in the interestsof its shareholders. This lead to a decrease in share price asinvestors knew that it would mean that Vodafone would have to sell itsprofitable stake Verizon to buy AT&T Wireless. The steep drop in Fig 1suggests that the market was efficient in its reaction to thisannouncement.The formal bidding war began on the 13th when Cingular made an initialoffer of $30bn, and the offer was matched by Vodafone. Cingular thenraised its bid to $35bn which was again matched by the Britishcompany. When Cingular raised its offer to $38bn, Vodafone once morematched the bid and this suggested to investors that Vodafone wouldpay too much for AT&T Wireless, which is why the s hare price droppedeach day till bidding ended on the 17th. On 17th February 2004,Vodafone withdrew from the auction when it concluded that it was nolonger in its shareholders best interests to continue discussions.We can see that there was a 5% increase in the share price when thiswas announced, and the volume of trading shows the marketsinformational efficiency Since news emerged that Cingular had made aninformal offer in mid-January, Vodafones shares have underperformedthe rest of the market, cutting the value of the company by more than