Securities Issuance Legal Resource Materials
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Entrepreneurship Law Editorial Team
Books
Ian R. Campbell, THE PRINCIPLES AND PRACTICE OF BUSINESS VALUATION (1975).
Ian R. Campbell, Robert B. Low & Nora V. Murrant, The Valuation & Pricing of Privately-Held Business Interests (1990). Abstract (from Amazon Product Description): The Valuation & Pricing of Privately-Held Business Interests will help business owners, directors and executives to better: understand the important differences that sometimes can arise between open market price and Notional Market value determinations - understand the valuation pitfalls that reside in the various Corporations Acts, Family Law Acts, and the Income Tax Act - strategize for business growth, and business sale - communicate with their professional advisors, understand when professional advisors can usefully be employed in valuation related matters and when they can not, and control fee expenditures related to business valuation consulting advice.
Robert G. Heim, GOING PUBLIC IN GOOD TIMES AND BAD: A LEGAL AND BUSINESS GUIDE FOR NEW MEDIA COMPANIES (2002).
Abstract (from publisher): Written for corporate officers and attorneys, this handbook details every critical step of the entire IPO process. Beginning with the basic step of deciding if an IPO is right for a particular company and progressing through each subsequent stage, this manual explains such critical issues as pre-IPO financing, choosing an underwriter, conducting due diligence, filing a registration statement, complying with securities laws, and getting a company's shares listed on an exchange. In addition to this IPO launch information, many of the forms needed for each stage of going public are provided. Also includes specific information to help companies going public in varying economic climates.
Shannon P. Pratt & Alina V. Niculita, Valuing a Business: The Analysis and Appraisal of Closely Held Companies (5th ed. 2007).
Abstract (from Amazon Product Description):
Valuing a Business provides professionals and students with business valuation information, offering clear, concise coverage of valuation principles and methods. Updated with new legal, financial, and compliance material, the Fifth Edition of Valuing a Business presents detailed answers to valuation questions ranging from executive compensation and lost profits analysis to ESOP issues and valuation discounts.
Articles
Olufunmilayo B. Arewa, Securities Regulation of Private Offerings in the Cyberspace Era: Legal Translation, Advertising and Business Context, 37 U. Tol. L. Rev. 331 (2006).
Abstract (from author):
Evaluating the application of existing securities laws and regulation in a cyberspace context requires an understanding of how existing legal structures accommodate changing societal or other conditions, including changes resulting from technological innovation and changing business culture and practice, which both encompass and extend beyond changes resulting from technological innovations. Understanding the application of securities regulation in such circumstances represents a distinct response to the familiar problem of applying and borrowing from existing legal frameworks in new contexts. However, since existing securities laws and regulations were originally crafted during an earlier time period, the translation of such frameworks in new contexts leads at times to questionable outcomes, at least partly because such frameworks represent a response to a particular historical context involving specific business practices that might not be as relevant in the business climate of today. This is particularly true with respect to non-public offerings, which were recognized in the Securities Act of 1933 from its inception. This Article assesses the translation of existing securities laws and regulation in the cyberspace context of non-public offerings, focusing specifically on restrictions on general solicitations and advertising in non-public offerings, as well as whether and how structures that exist in "real" space can be adapted in the cyberspace context.
Francesco Bova et al., The Sarbanes-Oxley Act and Exit Strategies of Private Firms (2011), available at http://ssrn.com/abstract=1730242.
Abstract (from author):
The costs and benefits of the Sarbanes-Oxley Act of 2002 (SOX) have been oft-debated since the inception of the Act. Much of the extant literature has assessed the costs and benefits of SOX to publicly-traded companies. We focus on the costs of SOX compliance for private firms wanting to exit the private market via either an acquisition by a public firm or an IPO. Consistent with our predictions we establish three principal findings. First, SOX appears to have shifted the incentive for firms to exit the private market via IPO to exit via acquisition by a public acquirer. Second, private target deal multiples are increasing in variables that proxy for a private target’s level of pre-acquisition SOX compliance. For our median-sized private target, the estimated dollar value decrease in deal proceeds when one moves from a high level to a low level of pre-acquisition SOX compliance is $1.3 million. Finally, public target deal multiples are not affected by a public target’s level of pre-acquisition SOX compliance. These findings suggest that SOX-related costs have both restricted the action space of possible exit strategies for private firms and led to lower deal multiples for those private acquisition targets that are less likely to be SOX compliant prior to acquisition. We believe that the implications from our tests will be relevant to regulators in the U.S. and many countries outside the U.S. that are attempting to improve their country’s governance and listing standards and potentially seeking alternatives to SOX-like standards, especially with respect to internal controls. International regulators need to assess the total costs of SOX, including costs imposed on private company shareholders, when contemplating the net benefits of SOX-like regimes.
Abraham J.B. Cable, Fending for Themselves: Why Securities Regulations Should Encourage Angel Groups, 13 U. Pa. J. Bus. L. 107 (2010).
Abstract:
This article argues that securities law has not kept up with the needs of today’s entrepreneurs and their investors, artificially lowering the potential for new companies to find financing, especially from angel groups.
Stephen J. Choi, Gatekeepers and the Internet: Rethinking the Regulation of Small Business Capital Formation, 2 J. Small & Emerging Bus. L. 27 (1998).
Abstract (from author):
This Article argues that reduced communication costs through the Internet will both make it more difficult for countries to impose mandatory securities regulatory regimes and increase the value of regulatory competition. Both issuers and investors will value regulations that reduce the incidence of fraud. Securities market participants, therefore, will voluntarily bind themselves to value-increasing securities regulations. Private sources of investor protection, including third party certifiers of information, will also flourish over the Internet. This Article argues that the Internet will make it possible for issuers and investors to pick and choose among both public and private sources of protections, leading to the best combination of protections for each particular securities offering.
Stuart R. Cohn & Gregory C. Yadley, Capital Offense: the Sec's Continuing Failure to Address Small Business Financing Concerns, 4 N.Y.U. J. L. & Bus. 1 (2007).
Abstract:
This article reviews the criticisms leveled by small business advocates against the Securities and Exchange Commission efforts to lighten the legal and regulatory burden on small companies that are raising capital. It provides a review of SEC proposals aimed at small business financing and concludes that these proposals, while somewhat helpful, fall short of addressing the capital formation problems faced by small businesses. The authors discuss the primary hurdles confronting small businesses under the securities laws and offer a critique informed by the twin goals of protecting investors while providing realistic opportunities for small businesses to raise capital in compliance with the regulatory scheme.
Jill E. Fisch, Can Internet Offerings Bridge the Small Business Capital Barrier?, 2 J. Small & Emerging Bus. L. 57 (1998).
Abstract (from author):
Internet technology offers the potential to reduce the search and information costs associated with capital formation. Commentators have suggested that the Web will enable small business to achieve better access to the capital markets. To facilitate this access, they have suggested regulatory reforms to make Internet offerings cheaper and easier. At the same time, small business offerings have been identified as among the most risky, offering a caution to those who counsel regulatory reform. This Article examines the existing regulatory climate. State and federal regulators have adopted a number of recent reforms to facilitate the use of the Internet and to reduce the regulatory burden on small business offerings. The Article explores proposals for further reform and evaluates the existing evidence on the extent to which previous regulatory changes have affected the use of the Internet for small business capital formation. The Article observes that, despite these reforms, small business have had limited success to date in using the Internet as a substitute for traditional financing methods. The Article goes on to consider the effect of substituting public capital markets for traditional small business financing sources, such as bands, angel investors, and venture capital, if technological and regulatory change makes this substitution possible. In particular, the Article indentifies nonfinancial benefits that banks and private equity provide to small businesses through active managing and monitoring. Shifting the source of small business capital may sacrifice these benefits, at the cost of future business performance.
Theresa A. Gabaldon, Love and Money: An Affinity-Based Model for the Regulation of Capital Formation by Small Businesses, 2 J. Small & Emerging Bus. L. 259 (1998).
Abstract (from author):
The focus of the Forum is the impact of technology and innovation on the financing of small business. The significance of love and friendship to this topic may not be obvious. One could, I suppose, posit a family Web site as the securities-offering vehicle posing the problems described below. The authorial intent, however, was to alleviate, without criticizing, the quite possibly disembodied nature of the forum discussion -- to interject some flesh and blood. Real people borrow money from their sisters. They always have and, on or off the Internet, I hope they always will.
Kathleen Weiss Hanley & Gerard Hoberg, Litigation Risk, Strategic Disclosure and the Underpricing of Initial Public Offerings (FEDS Working Paper No. 2011-12, 2011), available at http://ssrn.com/abstract=1810084.
Abstract (adapted from author):
Using word content analysis on the time-series of IPO prospectuses, we find evidence that issuers trade off underpricing and strategic disclosure as potential hedges against litigation risk. This tradeoff explains a significant fraction of the variation in prospectus revision patterns, IPO underpricing, the partial adjustment phenomenon, and litigation outcomes. The authors find that strong disclosure is an effective hedge against all lawsuits. Underpricing, however, is an effective hedge only against the incidence of Section 11 lawsuits, those lawsuits which are most damaging to the underwriter. Underwriters who fail to adequately hedge litigation risk experience economically large penalties including loss of market share.
Jennifer J. Johnson, Private Placements: A Regulatory Black Hole, 35 Del. J. Corp. L. 151 (2010).
Abstract (from author):
Many investors, including vulnerable senior citizens, are victimized each year in dubious securities offerings yet governmental regulators can do little to intervene. Utilizing the Rule 506 private placement exemption, promoters today can escape regulatory review by both federal and state securities officials. While states at one time served as “local cops on the beat” to protect their citizens, Congress in 1996 preempted state authority, thus creating a situation in which suspect investment schemes can proliferate below any governmental radar screen. This article questions the continued wisdom of this regulatory vacuum, especially in light of recent financial events.
This article reviews the legislative history of this preemptive statute, the National Securities Markets Improvements Act of 1996 (NSMIA), and concludes that the preemption of private placements either resulted from congressional misconceptions, back room politics arising from the conservative deregulatory agenda of the decade, or both. After analyzing the regulations and the private placement market as it existed in 1996, and as it operates today, the article concludes that NSMIA’s cogent preemptive force primarily impacts state authority over the smaller, most risky private placements. Combined with the lack of federal oversight, this statutory preemption creates a regulatory abyss that permits many questionable offerings to take place. In its zeal to deregulate, Congress left many investors with little, if any, governmental protection. This article proposes a return to state supervision of designated private placements. This modest proposal would foster capital formation, protect investors, and provide for a more rational and efficient legislative framework to regulate private securities transactions.
Online Resources
Trent Dykes, Financing Your Startup: How to Sell Stock Without Going to Jail, Techflash, http://www.techflash.com/seattle/2011/01/financing-your-startup-how-to-sell.html (last visited June 6, 2011).
Gaebler.com, Resources for Entrepreneurs, Starting a Securities & Commodity Exchanges Business
http://www.gaebler.com/Starting-a-Securities-and-Commodity-Exchanges-Business.htm
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