USX Corporation. New form of equities - Essay Example

USX Corporation New Form of Equities Executive Summary USX Corporation is a diversified company dealing with energy and steel industries. The history of the company dates back to 1901 and its stocks languished for many years. It is necessary to mention that the history of USX was marked by many labor disputes, consolidations and acquisitions. The company was pressured to "spin steel business off from its energy business". (Gilson 1996) The company sold billions of dollars in assets, because the company faced serious problems.

Many proposals were made to improve the situation. Nowadays the company has rather stable position in the market. Nevertheless every company has to make new decisions in order to remain highly competitive, because steel industry is a little troublesome, although energy industry provides greater profits. (Gilson 1996) The guidelines of the paper are to find out 1. what course of action needs to be taken to improve the company's stability 2. what new proposal is to be implemented to improve positions of the company in the equity market All the mentioned issues are very important for analyzing, because they are the evidence of true position of the company in the stock market.

The paper takes also into consideration the idea of targeted stock as it would allow the company to maintain its stability and credibility among shareholders and investors. The idea of targeted stocks seems rather suitable for USX, because it would solve many company's problems as targeted stocks wouldn't be taxable at shareholder and corporate levels. New Form of Equity The idea of new possibility came from Hernandez (Senior Vice-President Finance and Treasure) and Ron Gallatin. Such aim of new proposal was actually to maintain the credibility of USX in the equity market while the company will improve its value in the stock market.

According to new proposal the company would issue two classes of targeted stocks. The issued targeted stocks would be the distinct "classes of parent company common stock that would track the performances of distinct businesses belonging to the parent". (Gilson 1996) It is necessary to note that both earnings and revenues of the businesses involved would be reported separately. USX would also formally allocate assets and liabilities to those businesses. The purpose of such allocation would be just financial and would allow the businesses to make separate dividend decisions.

It is apparent that allocation wouldn't affect assets and liabilities of the businesses. The proposal provides one Board of Directors and one federal income tax return. One class of common stocks is assigned to energy business and other class of common stocks is assigned to steel business. The idea of such policy is to allow its shareholders to their investment opportunities within one specific business. In the result the company would become more flexible and would increase its capital and income.

The company's stocks would have the higher multiple. (Gilson 1996) If the proposal succeeds the company will be able to establish new incentive plans which would be connected with specific businesses where people worked. Financial analysts admit that such proposal implemented will provide greater efficiency and better coverage of USX. (Gilson 1996) The new proposal of targeted stock would mean one company with two stocks. Although the implementation of new proposal appeared to be difficult and not clear, USX realized that it had to significantly improve the performance of common stocks in the equity market.

The company needed something new and fresh to attract investors. And the idea of targeted stocks is rather suitable for this purpose. (Gilson 1996) Works cited Gilson, Stuart and Cott, Jeremy. USX Corporation. Boston, MA: Harvard Business School, 1996.