The following are some of the points to work on for the case. The main point is to (1) understand the corporate governance roles of hostile takeover bids and (2) evaluate the alternative reactions that Red October can choose.

1. What roles do hostile takeover bids play in corporate governance? What legal and regulatory institutions are needed to make the market for corporate control function well? Was Russia ready for that in 1996?

2.  Grant Financial Center was Red October's financial advisor, auditor, and official market maker for its stock. In the 8 weeks preceding the Koloss tender offer, it bought 1% of Red October's outstanding shares, but that moved the stock price up by 50%. Given the bid-ask spread of $1 for Red October and who the market maker was for the stock, do you think Koloss was rational to make a public tender offer? Why didn't they privately approach Red October's management to work out a friendly private takeover?

3. In Menatep's explanation of the offer, it seemed that every stakeholder in Red October would be better off, even its existing management and employees. Was its explanation reasonable? Anything missing in this? Why were some emplyees of Red October not happy with the offer and why would they even decide to possibly not tender their shares?

4. With the shareholder structure of Red October, how likely was it for Koloss to have 51% shares tendered at the new price of  $9.5 per share? How serious or real  was this challenge?

5. How much do you value Red October's shares? Use the data in Exhibits 8, 9 and 10 and other data as needed, to help Yegorov do the valuation.

6. Why would Menatep value Red October so much more than the stock market?

7. In making the final decision, whose interest should the Red October management pay attention to first and foremost? In the privatization structure worked out for Red October, its management and employees, and their controlled organizations, ended up with about 40% of its equity. Thus, it looked like a management buy-out (MBO) structure. In this sense, is an MBO structure a suitable solution to resolve the conflicts among different stakeholders in a firm? Or, should the management own less in a firm so that the outside market for corporate control can always have some role to play in ensuring that the firm's management is doing a "good" job?

8. Among the different options that Red October faced, which approach would you recommend Yegorov to suggest to his boss and Red October's board? Why?