Securities Law Commons^™

Should Issuers Be On The Hook For Laddering? An Empirical Analysis Of The Ipo Market Manipulation Litigation, Adam C. Pritchard, Stephen J. Choi

Articles

On December 6, 2000, the Wall Street Journal ran a front-page story exposing abuses in the market for initial public offerings (IPOs). The story revealed "tie-in" agreements between investment banks and initial investors seeking to participate in "hot" offerings. Under those agreements, initial investors would commit to buy additional shares of the offering company's stock in secondary market trading in return for allocations of shares in the IPO. As the Wall Street Journal related, those "[c]ommitments to buy in the after-market lock in demand for additional stock at levels above the IPO price. As such, they provide the rocket fuel …

Beyond The Business Judgment Rule: Protecting Bidder Firm Shareholders From Value-Reducing Acquisitions, Ryan Houseal

University of Michigan Journal of Law Reform

During the takeover transactions of the 1980s, bidder firms paid target firm shareholders average premiums of approximately 50% for their shares. Did the sizable premiums paid to target firm shareholders during the 1980s reflect post-takeover improvement in the target's performance? Or were the premiums a result of the mismanagement of the bidder firms' assets?

The answer will help determine whether additional legal mechanisms should be established to protect bidder firm shareholders from the threat of management's consummation of value reducing acquisitions. Accordingly, this Note examines various studies which attempt to identify the source of the premiums paid to target firm …

Too Busy To Mind The Business? Monitoring By Directors With Multiple Board Appointments, Stephen P. Ferris, Murali Jagannathan, Adam C. Pritchard

Articles

We examine the number of external appointments held by corporate directors. Directors who serve larger firms and sit on larger boards are more likely to attract directorships. Consistent with Fama and Jensen (1983), we find that firm performance has a positive effect on the number of appointments held by a director. We find no evidence that multiple directors shirk their responsibilities to serve on board committees. We do not find that multiple directors are associated with a greater likelihood of securities fraud litigation. We conclude that the evidence does not support calls for limits on directorships held by an individual.

Should Congress Repeal Securities Class Action Reform?, Adam C. Pritchard

Other Publications

The Private Securities Litigation Reform Act of 1995 was designed to curtail class action lawsuits by the plaintiffs’ bar. In particular, the high-technology industry, accountants, and investment bankers thought that they had been unjustly victimized by class action lawsuits based on little more than declines in a company’s stock price. Prior to 1995, the plaintiffs’ bar had free rein to use the discovery process to troll for evidence to support its claims. Moreover, the high costs of litigation were a powerful weapon with which to coerce companies to settle claims. The plaintiffs’ bar and its allies in Congress have called …

Panel Presentation: Securities Regulation And Corporate Responsibility, Donald C. Langevoort

Georgetown Law Faculty Publications and Other Works

What I want to do is talk about the big picture, as John suggested, and consider the likely spillover effects of Sarbanes-Oxley. I want to do this in a discretely administrative law-oriented way, taking two themes that were very visible and driving forces behind the legislation. The first, as Mary suggested in her opening remarks, is a question about federalism. It has been common for the last twenty years, at least, to trot out - as John just did - a distinction between federal and state spheres of competency. The SEC is on the disclosure side, while the substance of …

Back To The 1930s? The Shaky Case For Exempting Dividends, Reuven S. Avi-Yonah

Articles

This article is based in part on the author’s U.S. Branch Report for Subject I of the 2003 Annual Congress of the International Fiscal Association, to be held next year in Sydney, Australia (forthcoming in Cahiers de droit fiscal international, 2003). He would like to thank Emil Sunley for his helpful comments on that earlier version, and Steve Bank, Michael Barr, David Bradford, Michael Graetz, and David Hasen for comments on this version. Special thanks are due to Yoram Keinan for his meticulous work on the EU regimes (see Appendix). All errors are the author’s. In this report, Prof. Avi-Yonah …

Passports, Private Choice, And Private Interests: Regulatory Competition And Cooperation In Corporate, Securities, And Bankruptcy Law, Frederick Tung

Faculty Scholarship

This paper discusses international regulatory competition in the related areas of corporate, securities, and bankruptcy law, contrasting two different forms that regulatory competition may take. The first is private choice, or "direct competition." In this arrangement, firms are free to elect the regulatory regime that will govern their affairs, regardless of the location of a firm's assets, personnel, registered office, or transactions. The paradigmatic example is corporate charter competition among US states. The second form of competition is the "regulatory passport" arrangement, which has also been variously described as "mutual recognition" and "reciprocity." In this scenario, nations agree to recognize …

Technoliability: Corporate Websites, Hyperlinks, And Rule 10(B)-5, Mason Miller

Washington and Lee Law Review

No abstract provided.

Looking A Gift Horse In The Mouth: An Analysis Of Free Internet Stock Offerings, Joel Michael Schwarz

Michigan Telecommunications & Technology Law Review

How much should an investor pay for one share of stock in Yahoo? Or a share of stock in America Online? As publicly traded companies, one need only consult the stock charts in any local newspaper to determine the value the market has placed on these shares. Despite what many Internet sector analysts have professed to be astronomically high valuations, these publicly traded companies possess easily verifiable valuations determined by the free market forces that constitute the building blocks of our economy, and safeguarded by the oversight of federal regulators such as the Securities & Exchange Commission ("SEC"). But what …

The Direction Of Corporate Law: The Scholars' Perspective, John C. Coffee Jr., Richard A. Booth Marbury Research Professor Of Law, R. Franklin Balotti, David C. Mcbride, Edward P. Welch

Faculty Scholarship

Transcript of a panel on a scholar's approach to corporation law.

Deconstructing Section 11: Public Offering Liability In A Continuous Disclosure Environment, Donald C. Langevoort

Georgetown Law Faculty Publications and Other Works

This article is an effort to rethink civil liability in capital-raising transactions by large capitalization issuers. After a brief digression about who should set liability standards, the article then addresses two related questions. The first deals with a natural question: Should not the primary regulatory effort for large issuers be to assure continuous disclosure in the secondary marketplace, given the far larger volume of such trading in that market compared to that in primary transactions? Second, if we have developed a satisfactory regime of disclosure responsibilities for this setting, what more, if anything, in terms of liability protection, is needed …

In Re Silicon Graphics Inc.: Shareholder Wealth Effects Resulting From The Interpretation Of The Private Securities Litigation Reform Act's Pleading Standard, Marilyn F. Johnson, Karen K. Nelson, Adam C. Pritchard

Articles

This Article presents an empirical study of changes in shareholder wealth resulting from the Ninth Circuit Court of Appeals decision in In re Silicon Graphics Inc. Securities Litigation, which interpreted the pleading provision established in the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Congress passed the Reform Act as part of an ongoing effort to protect corporations from abusive suits alleging "fraud by hindsight." In such suits, plaintiffs claimed that a sudden drop in a company's stock price was evidence that the issuer and its management covered up the bad news that led to the price drop. …

The Securities Litigation Uniform Standards Act Of 1998: The Sun Sets On California's Blue Sky Laws, David M. Lavine, Adam C. Pritchard

Articles

It is often said that California sets the pace for changes in America's tastes. Trends established in California often find their way into the heartland, having a profound effect on our nation's cultural scene. Nouvelle cuisine, the dialect of the Valley Girl and rollerblading all have their genesis on the West Coast. The most recent trend to emerge from California, instead of catching on in the rest of the country, has been stopped dead in its tracks by a legislative rebuke from Washington, D.C. California's latest, albeit short-lived, contribution to the nation was a migration of securities fraud class actions …

Directorial Fiduciary Duties In A Tracking Stock Equity Structure: The Need For A Duty Of Fairness, Jeffrey J. Hass

Michigan Law Review

Part I of this article briefly describes the key distinctions between a tracking stock corporation and a conventional corporation. It then touches on the reasons why corporations have adopted tracking stock equity structures. Part II articulates the unique legal challenges presented by a tracking stock equity structure. Part III discusses the disclosure that tracking stock corporations have made with respect to these challenges. Part IV briefly summarizes the fiduciary duties of care and loyalty and explores why these duties are ill-equipped to address these challenges. Part V presents the duty of fairness and discusses the duty's elements in detail. In …

Reflections On Executive Compensation And A Modest Proposal For (Further) Reform, Mark J. Loewenstein

Publications

No abstract provided.

Cook And The Corporate Shareholder: A Belated Review Of William W. Cook's Publications On Corporations, Alfred F. Conard

Michigan Law Review

A Review of A Treatise on the Law of Stock and Stockholders, as Applicable to Railroad, Banking, Insurance, Manufacturing, Commercial, Business, Turnpike, Bridge, Canal, and Other Private Corporations by William W. Cook

Dynamic Economic Analyses Of Selected Provisions Of Corporate Law: The Absolute Delegation Rule, Disclosure Of Intermediate Estimates And Ipo Pricing, Royce De R. Barondes

Faculty Publications

This Article examines three separate aspects of the relationships between corporations and their securityholders from a dynamic economic perspective: (i) the feasibility of permitting shareholders to participate in the management of their corporations through the exercise of voting rights, (ii) Rule 3b-6, the safe harbor for projections (the Safe Harbor)8 under the Securities Exchange Act of 1934 (the 1934 Act),9 and (iii) the extraordinary returns available from investing in initial public offerings (IPO's). Three particular dynamic aspects are implicated in these situations.

Hail Britannia?: Institutional Investor Behavior Under Limited Regulation, Bernard S. Black, John C. Coffee Jr.

Michigan Law Review

The two authors of this article have been on opposite sides of this debate, but both recognize that no single explanation is complete and that other factors, such as the self-interest of fund managers, the conflicts of interest faced by institutions who want to retain corporate business, cultural forces, collective action problems, and what we can call path dependence- the difficulty of changing the structure and behavior of highly evolved and specialized institutions - have causal roles in explaining shareholder passivity. The central question in research on American corporate governance is how these forces interact to produce the characteristic …

Making America Competitive, Mark J. Loewenstein

Publications

No abstract provided.

Shareholder Passivity Reexamined, Bernard S. Black

Michigan Law Review

This article argues that shareholder monitoring is possible: It's an idea that hasn't been tried, rather than an idea that has failed. I defer to a second article currently in draft the question of whether more monitoring by institutional shareholders is desirable. Will direct shareholder oversight, or indirect oversight through shareholder-nominated directors, improve corporate performance, prove counterproductive, or, perhaps, not matter much one way or the other? What are the benefits and risks in giving money managers - themselves imperfectly monitored agents - more power over corporate managers? If more shareholder voice is desirable, how much more and …

Protecting Nonshareholder Interests In The Market For Corporate Control: A Role For State Takeover Statutes, Frank J. Garcia

University of Michigan Journal of Law Reform

Part I of this Note describes a phenomenon of modern corporate activity first identified over fifty years ago as the "separation of ownership and control." This separation gives rise to the need for a governing corporate norm; recognizing the normative aspect of this phenomenon has direct implications for the takeover debate.

Part II analyzes the problem of a target board's fiduciary duty as the modern version of the fundamental normative issue of corporate law. It argues that the norm of shareholder wealth maximization, assumed as the starting point by those most in favor of an active and minimally regulated control …

Proxy Preclearance And The First Amendment: The Unconstitutionality Of Rule 14a-6, Elizabeth J. Holland

Cardozo Law Review

No abstract provided.

The Case For Employee Ownership In Overseas Operations Of U.S. Multinational Enterprises In Central America, William G. Hopping

Michigan Journal of International Law

Part II of this note explains the relevance of using U.S. direct investment in Central America as a starting point for encouraging employee ownership. Part III describes the essential legal framework of the ESOP in the U.S., providing a framework from which to adapt the ESOP to other countries. Part IV argues that all parties participating in this form of expanded ownership will realize significant short and long-term benefits, but points out some problems of transferring ESOPs, a U.S. legal innovation, to different cultural and business environments. Part V presents some of the legal and economic issues of adapting ESOPs, …

Shareholders Versus Managers: The Strain In The Corporate Web, John C. Coffee Jr.

Michigan Law Review

Part I will seek to understand why firms trade in the stock market at a substantial discount from their asset value. It will answer that existing theories of the firm have not given adequate attention to a critical area where shareholders and managers have an inherent conflict, one that the existing structure of the firm does not resolve or mitigate. Despite the significant changes in the internal structure of the corporation over the last half century that have been described by business historians, there remains a deep internal strain between shareholders, on the one hand, and managers and employees, on …

Corporate Social-Reform, The Business Judgment Rule And Other Considerations, Robert N. Leavell

Scholarly Works

In recent years there has been a well-publicized movement to induce corporations to use their economic wealth and power to achieve "social-reform," rather than carry on as usual by professing to be guided only by profit-making. Social change is sought by allowing shareholders to make, or influence directly, those management decisions which significantly affect the quality of life in this country. This approach has found support on college campuses and among the commentators in this field. The Securities Exchange Commission and the courts also have endorsed this approach by legitimating such a role for shareholders despite the fact that it …

Schreiber V. Burlington Northern, Inc., Lewis F. Powell Jr.

Supreme Court Case Files

No abstract provided.

Materiality, Law Reform, And Regulation By Prosecution, Michael Rosenzweig

Michigan Law Review

A Review of Regulation by Prosecution: The Securities & Exchange Commission Versus Corporate America by Roberta S. Karmel

Daily Income Fund, Inc. V. Fox, Lewis F. Powell Jr.

Supreme Court Case Files

No abstract provided.

Limiting The Use Of The Rico Act As A Defense To Hostile Corporate Takeovers, Mary Ann Lesniak

University of Michigan Journal of Law Reform

This Note argues that RICO could be a legitimate defense to a hostile corporate takeover pursuant to a cash tender off er if shareholders who retain stock will be harmed by the takeover. Part I of this Note examines the general background of the RICO Act. Part II applies the Act to a hostile cash tender offer and examines each element of a civil RICO action. Part III advocates the use of RICO's injury requirement to limit this application of the Act and analyzes the potential injuries to shareholders and management during a hostile cash tender offer. This limitation upon …

Private Meetings And Good Cause Exceptions: Gulf & Western May Provide The Sec New Tools For Piercing The Corporate Attorney-Client Privilege

Washington and Lee Law Review

No abstract provided.