Walgreens Stock Plumet

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Walgreen, one of the America’s three largest drugstore chains have been battling to move its headquarters out of Illannoy,USA. Walgreens was planning  to buy the remaining stake of  its alliance,Boots after bought  45% of the stake back in 2012. This is a tough decision: if Walgreens decided to move its headquarter to the UK, it will have to experience tax inversion. This problem has brought several controversies which involved many stakeholders including Walgreen’s investors, US politicians, as well as the wall street. The article can be found here

Tax inversion happens when a company buy foreign company, move abroad and benefited from lower tax rate. In long term, it will be beneficial for Walgreens: a Wall Street analysts calculated, Walgreens could save billions of dollars over the next five years . However, many politicians in the US feel that this shows unpatriotic actions to avoid  taxes by going overseas.

In addition, this decision also  disappoint investors because in the long term the savings that would have been generated by an inversion far outweighed the short-term impact of negative publicity and the costs related to restructuring a deal, reflected through the financial statement . In the same time, Wall street is very concern about this decision. Walgreens decided to stay in the US and  it turned out that Walgreens’ stock prices by plummet by 15%.

We can see how firm’s decision highly affect stakeholders involved in the market. There are high risk decisions that  should be evaluated in order to minimize loss through this change. If the price of stock continues to fall, Walgreens will be more unattractive to the investors and therefore worsen its popularity in the future.

This case also reminds me one of my previous post where I explore  Tim Hortons buying Burger King and how it affects the business canvas model in the future.  I strongly believe, In the long run, partnership should be able to help company to expand its market, reach economies of scale as well as improve its capital investment.

http://www.ft.com/cms/s/0/69c41626-ba2a-11e1-aa8d-00144feabdc0.html#axzz3HzJV0WOE