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Research In Motion (RIM)
George Athanassakos, Steve Spenler
published: 2006 | Case Study | Accounting/Finance
Subject Area: Accounting/Finance
Key Issues: Equity Valuation; High tech (high growth) industry; Wireless data terminals
Case Description: In early 2000, Royal Dominion Securities Inc. (RDS) was hired to perform a valuation of Research In Motion (RIM), a Waterloo, Ontario wireless data terminal manufacturer whose market capitalization had increased from $91 million to $7.7 billion US in the27 months since its Initial Public Offering. The firm was concerned about the impact of fluctuating market prices on internal activities such as capital structure and employee compensation policies, as well as on merger and acquisition initiatives. Kirsten Scott had been assigned to anchor the valuation. Kirsten had joined RDS three years earlier and was recently promoted to Senior Research Analyst. She recognized this project as an opportunity for innovation in applying traditional valuation techniques to a firm within an important new growth segment in the North American equity markets. Supported by revenue projections and key forecasting parameters developed by the RDS valuation team, Kirsten's primary role was to establish a Discounted Cash Flow model for the value of the firm and eventually the value of the equity. Kirsten realized that to estimate the proper value for the firm's common shares currently outstanding and have confidence in it, she had to detrermine an appropriate value for the firm's warrants and employee stock options. In addition, she had to triangulate the DCF estimation of equity by also using other methods.
# Case Pages: 11
Case Number: 020032-G
Teaching Note: Yes
revised May 23/06
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