1. Panda Ethanol Case Study

2. Purpose of the Case Study Illustrates how A private firm can use a reverse merger in lieu of an IPO to go public Private investment in public equity (PIPES) may be used to finance ongoing operations following the reverse merger Reverse splits can be used to achieve agreed upon ownership distributions Purchasing stock in the prior to a merger proposal can be used to influence the outcome

3. Key Participants Panda Ethanol Grove Street Investors Grove Panda LLC Cirracor

4. Merger Terms One share of Panda Ethanol common for each share of Cirracor common Cirracor shareholders to own 4% of newly issued and outstanding common stock of the surviving company Panda Ethanol shareholders to own remaining 96% Panda Ethanol to issue 15 million new shares through a private placement valued at $90 million Total Panda Ethanol shares outstanding: --13.8 million existing shares --15.0 million new shares Total Cirracor shares outstanding: 3.5 million

5. Applying Reverse Splits Shares Outstanding (Millions) Ownership Distribution (%) Shares Outstanding (Millions) Ownership Distribution (%) (Before Reverse Merger)(After Reverse Merger) Panda Ethanol 28.889.2 1 28.896 Cirracor Inc.3.510.8 2 1.2 3 4 1 28.8/(28.8/3.5) 2 3.5/(28.8+3.5) 3 A result of a 3 for 1 reverse split. 1.2 million shares subject to rounding.

6. Discussion Questions 1.Discuss the pros and cons of a reverse merger versus an initial public offering for taking a company public. 2.Why did Panda Ethanol undertake a private equity placement totaling $90 million shortly before implementing the reverse split? 3.How were the Panda Grove investment holdings used to influence the outcome of the proposed merger?