A View of the Dutch IPO Cathedral

This is the Keynote Address for IPOs and the Internet Age: The Case for Updated Regulations, a symposium held at The Ohio State University Michael E. Moritz College of Law. Initial public offerings ( IPOs ) are an exercise in asymmetrical valuation. One mechanism for bridging these asymmetries is a private financial intermediary to conduct price discovery by meeting with preferred investors. An alternate mechanism is an auction, such as a descending-bid or Dutch procedure, to conduct price discovery by soliciting bids from all prospective investors. Recent disenchantment with the relationship between issuers and intermediaries has prompted some to hail (online) auction-based IPOs. This switch, however, incurs a variety of legal costs that may justify broader mandatory disclosure and state intervention. The legal costs of auction-based IPOs can be gleaned from examining various international regulatory regimes. To comparatively evaluate these regimes, this article introduces a paradigmatic framework derived from the classic tri-tiered schema that Guido Calabresi and A. Douglas Melamed formulated for legal entitlements. By conceptualizing IPOs as a problem of asymmetrically-valued shares, different kinds of regulations can assume the form of property, liability, and inalienability rules. The distinctions between these rules explain variations within the regulatory schemes of France, Israel, and Taiwan, the last bastions of auction-based IPOs, and evince the legal price that must be paid for the United States to offer an auction-based alternative to bookbuilding

Tracing

Tracing is a method that appears within multiple fields of law. Distinct conceptions of tracing, however, have arisen independently within securities and remedial law. In the securities context plaintiffs must “trace” their securities to a specific offering to pursue certain relief under the Securities Act of 1933. In the remedial context victims who “trace” their misappropriated value into a wrongdoer’s hands can claim any derivative value, even if it has appreciated. This article is the first to compare and then cross-apply tracing within these two contexts. Specifically, this article argues that securities law should adopt a version of the “rules-based tracing” method from remedial law. This method’s tracing of exchanged value, instead of purchased securities, will restore broad access to private civil remedies and the optimal level of deterrence for fraudulent public offerings

The Proper Test for Assessing the Admissibility of Nonscientific Expert Evidence under Federal Rule of Evidence 702, 1997 John M. Manos Writing Competition on Evidence

Courts have fashioned various common law standards to determine the admissibility of nonscientific expert evidence. This Article examines these different standards to evince the need for harmony. Part I of this article examines the admissibility tests for nonscientific expert evidence administered by federal courts before Federal Rule of Evidence 702. The first such test appears in Frye v. United States, which establishes only expert knowledge based on a method or principle that has gained sufficient general acceptance can be admitted. Part I concludes by discussing the problems that plague these different applied tests and beckon for a single standard. Part II of this Article examines the Supreme Court\u27s attempt to establish Federal Rule of Evidence 702 as this single standard in Daubert v. Merrell Dow Pharm. Part II critically analyzes this case, which involves expert evidence that an anti-nausea drug is a human teratogen. Part III of this Article surveys how federal courts currently assess nonscientific expert evidence. There are two primary tests embraced by federal courts. First, some courts maintain that Daubert\u27s reasoning can be applied to nonscientific expertise. Second, some courts interpret Daubert as being inapplicable to nonscientific expertise and instead rely on Federal Rule of Evidence 702. Part III critically examines the application of these tests. Part IV of this Article proposes a more promising test than the current alternatives. Part IV argues that courts should reconsider the Frye test as the best way to determine the admissibility of nonscientific expert evidence. This article concludes with the assertion the general acceptance test is more effective than the current alternatives

The Dutch Auction Myth

The initial public offering process is under assault. Critics of this process have woven a complex set of interconnected objections to the orthodox method for conducting IPOs, pricing of shares, and allocating them to preferred investors. These critics instead point to online auctions as an alternative IPO method that can provide more equitable access, efficient prices, and egalitarian allocations. These claims rest on Google’s recent IPO and W.R. Hambrecht + Co.’s OpenIPO mechanism, conventionally regarded as impure variants of what is known as a descending-bid or Dutch auction (Dutch IPO). This article assesses the empirical and theoretical case for Dutch IPOs. Google’s IPO featured peculiarities that delimit its utility as a case study. Instead this article novelly presents underpricing data on all OpenIPOs, as well as data about a French variant known as the Mise en Vente. The results fail to vindicate Dutch IPO supporters’ primary claims, which perilously rely upon observations from the anomalous two-year internet bubble period. Moreover, economic and financial analyses of Dutch IPOs reveal ways in which they may be susceptible to fraud that bookbuilding is not. Ultimately, claims of the Dutch IPO\u27s superiority over bookbuilding at best are unproven and at worst fail to appreciate certain risks

De-Limiting Rules

Baseball is a game governed by a delicate equilibrium of complex rules. But no rule incites more confusion or controversy than the Infield Fly. This is perhaps because the rule embodies a greater tension: between a constantly evolving game that is steeped in revered traditions, and a rule that has become part of popular lore but whose original impetus was premised on a notion of fair play that hails from a bygone era

Business trusts

The business trust arguably is the most prominent and yet enigmatic organizational form used today. The problem is that no one knows exactly how prevalent business trusts are, much less why they are the preferred vehicle for a broad and diverse range of transactions. This chapter sheds some light on the business trust by examining its early history at common law, its subsequent mutation into modern statutory and contractarian forms, as well as some of its most common functions. The more closely we scrutinize the business trust, the more apparent it becomes that the pertinent question about business trusts is not why they exist, but rather why they are not used to an even greater extent than what we suspect

Disregarding the Salomon Principle: An Empirical Analysis, 1855-2014

For over a century UK courts have struggled to negotiate a coherent approach to the circumstances in which the Salomon principle – that a corporation is a separate entity – will be disregarded. Empirical analysis can facilitate our understanding of this mercurial area of the law. Examining UK cases from 1885 to 2014, we created a final dataset of 213 cases coded for 15 different categories. Key findings confirm historical patterns of uncertainty and a low but overall fluctuating disregard rate, declining recently. Criminal/fraud/deception claims link strongly to disregard outcomes. Private law rates are low but tort claims have a higher disregard rate than contract. Individual shareholders are more susceptible to disregard than corporate shareholders. The English Court of Appeal plays a key role in successful disregard claims particularly in tort. In general, while disregard rates were very context specific, concerns about the diminished sanctity of the Salomon principle may be overblown