SpartanNash Company: The Amazon Warrants (B)

Name: SpartanNash Company: The Amazon Warrants (B) (English version)
SKU: 222033

Esty, Benjamin C.; Mayfield, E. Scott; Fisher, Daniel

Product #:222033

Supplier:Harvard Business School

Discipline:Finance

Setting:United States, 2020

Details:Supplemental Case (PDF) • 52 pages • 2022-01-26

Subjects:

Consumer behavior Partnerships Value creation Market research Business structures Strategy Finance and investing

Geography:

United States North America

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$7.50

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Learning Objectives

This case has four objectives. 1) Explore Amazon's use of equity investments (stock and warrants) as part of its commercial agreements with its suppliers. Why does Amazon regularly seek warrants as part of its commercial agreements with suppliers? 2) Analyze supply chain dynamics and the expression of market power-buyer and supplier power are two of Porter's "Five Forces" which partially determine the structural attractiveness of an industry. Explore whether Amazon's proposal was an attempt to extract value from a weaker supplier or an attempt to create shared value and align interests over the medium to longer term. 3) Raise two ethical and potentially legal issues around AMZN's practice of privately negotiating warrant agreements and then publicly disclosing them, and its practice of demanding free grants of warrants as part of its commercial agreements. 4) Learn to value equity warrants which are significantly and importantly different from traditional call options but are rarely covered in most introductory finance courses.