1. Because if they list shares on a public market, they have to report a lot of information to public, it makes the company become more transparency, and the company may lose control since their are other shareholders. The risk from public listing is the competitors can also buy the shares from public market like LVMH. The reward is the company can finance more money to make the company grow faster Even though Hermes has a family ownership for six generations, a number of the family members wanted to “cash-out” of the business. Usually, this would be affected by having other family members buy those shares or interests. But other family members did not either have the capital or interest in buying those shares. The solution was to list 25% of the company’s shares on the public marketplace, therefore accessing a liquid capital market for the firm’s shares. The risk of a public listing is the increasing reporting and transparency (information for customers, suppliers, and competitors), and the fact that anyinvestor can purchase those shares, like LVMH did. Another risks are takeover attempts and pressure to increase earnings. The rewards for a company going public are the financial benefit in form of rising capital, liquidity of share values, increased public awareness, and increase in market share.. 2. "Bernard Arnault and LVMH acquired a large position in Hermès shares without anyone knowing. How did they do it and how did they avoid the French regulations requiring disclosure of such positions?" LVMH acquired a large the position in Hermes shares using equity swaps. Equity swaps are derivative contracts whereby two parties enter into a contract to swap future cash flows at pre-set date. The cash flows are referred to as “legs” of the swap. In most swaps, one leg is tied to a floating rate like LIBOR and the other leg is tied to the performance of a stock or stock index. Also, equity swaps enable an investor to bet on the value of stock without actually owning the shares. An investor typically enters such a swap arrangement with a bank in return of a fee. To hedge its position, the bank will often buy and hold an underlying stock. Because these options were settled in cash, under AMF rules, they do not have to be declared. 3. The Hermes family defended themselves by forming a holding company of their family shares. How will this work and how long do you think it will last? The Hermes family defended themselves by forming a holding company of their family shares. How will this work and how long do you think it will last?They protected themselves when Laurent sold shares that were worth 1.8 million euros. They created holding company that would provide them that their ownership stake percentage would always vote as a one and that would secure them and continuously be the control of the family. This would actually protect them from any other company, and even if other companies buy their shares, family will be still in the control over it. From my perspective, it will last as long as its contract. However, if they start cashing out their shares, family would not last long. 3
