IPOs and the Slow Death of Section 5

Since its enactment, Section 5 of the Securities Act of 1933 has restricted sales-based communications with investors, but that effort is nearly dead even with respect to the most sensitive of offerings, the IPO. Our paper traces that devolution, which began almost as soon as the ’33 Act came into existence, though the SEC’s 2005 deregulatory reforms and Congress’ intervention in the JOBS Act of 2012. We show how much of this related to an embrace of “book-building” as the industry’s preferred method of price discovery, which requires private two-way communications between underwriters and potential sophisticated investors. But book-building (and the predictable IPO underpricing that results) has a retail dimension as well, and we point to ways in which the otherwise sensible deregulation may enable an over-stimulation of retail investor demand. We then explore two main justifications that have been given for the aggressive deregulation. The first is that any loss in prophylactic protection can be made up for by the threat of liability, particularly with an enhanced Section 12(a)(2). We find this unpersuasive for a variety of reasons. The other—amply visible in the long history of Section 5—is a faith in the “filtration” process, that retail investors gain protection because of the availability of the preliminary prospectus during the waiting period, to those involved in the selling process if not the investors themselves. Putting aside the biased incentives that affect filtration, much of what is most important—and conveyed privately to the institutions in the course of book-building—is forward-looking information that probably need not appear in the formal disclosure, whether preliminary or final. None of this is an argument for returning to the old prophylactics of Section 5. But it is cause for the SEC and FINRA to pay close attention to the retail investor effects of the IPO selling practices, especially in the post-JOBS Act era

“Publicness” in Contemporary Securities Regulation after the JOBS Act

The JOBS Act of 2012 reflects the largest deregulatory change to the Securities Exchange Act of 1934 over its more than 75 year history. It contracts the coverage of those companies subject to the obligations of ‘publicness” and it introduces an “on ramp” that will permit most newly-public companies to meet a lesser set of disclosure, internal control and governance obligations for up to five years. We set these changes against a larger discussion of when a private enterprise should be forced to take on public status in securities regulation, a topic that has been entirely under theorized. We conclude that the change from 500 to 2000 shareholders of record made by the JOBS Act, while entirely clear in its deregulatory thrust, misses a key point: “record” ownership is an antiquated metric for any measuring of publicness and Congress needs to find a better one, such as public trading. More broadly, we observe that Congress increasingly has defined public obligations in securities regulation less by the traditional touchstone of investor protection and more by ways that our largest companies affect constituencies beyond their investor base. Our boundary-setting thus should include two tiers of public companies with the smaller tier limited to core disclosure and governance obligations. Finally, our review of these boundary questions reveals a larger pattern that ought to inform how we understand securities regulation. Entrepreneurs and their advisors regularly occupy new unregulated space created in the wake of technological change or by gaps in regulation revealed as markets evolve. Government response, seemingly inevitably, is piecemeal and reactive. The result is a regulatory process that is more informal than administrative law theory usually suggests and more opaque than we might want in contemplating regulatory change

Global Seismic Oscillations in Soft Gamma Repeaters

There is evidence that soft gamma repeaters (SGRs) are neutron stars which experience frequent starquakes, possibly driven by an evolving, ultra-strong magnetic field. The empirical power-law distribution of SGR burst energies, analogous to the Gutenberg-Richter law for earthquakes, exhibits a turn-over at high energies consistent with a global limit on the crust fracture size. With such large starquakes occurring, the significant excitation of global seismic oscillations (GSOs) seems likely. Moreover, GSOs may be self-exciting in a stellar crust that is strained by many, randomly-oriented stresses. We explain why low-order toroidal modes, which preserve the shape of the star and have observable frequencies as low as ~ 30 Hz, may be especially susceptible to excitation. We estimate the eigenfrequencies as a function of stellar mass and radius, and their magnetic and rotational shiftings/splittings. We also describes ways in which these modes might be detected and damped. There is marginal evidence for 23 ms oscillations in the hard initial pulse of the 1979 March 5th event. This could be due to the $_3t_0$ mode in a neutron star with B ~ 10^{14} G or less; or it could be the fundamental toroidal mode if the field in the deep crust of SGR 0526-66 is ~ 4 X 10^{15} G, in agreement with other evidence. If confirmed, GSOs would give corroborating evidence for crust-fracturing magnetic fields in SGRs: B >~ 10^{14} G.Comment: 12 pages, AASTeX, no figures. Accepted for Astrophysical Journal Letter

Hard Burst Emission from the Soft Gamma Repeater SGR 1900+14

We present evidence for burst emission from SGR 1900+14 with a power-law high energy spectrum extending beyond 500 keV. Unlike previous detections of high energy photons during bursts from SGRs, these emissions are not associated with high-luminosity burst intervals. Not only is the emission hard, but the spectra are better fit by Band's GRB function rather than by the traditional optically-thin thermal bremsstrahlung model. We find that the spectral evolution within these hard events obeys a hardness/intensity anti-correlation. Temporally, these events are distinct from typical SGR burst emissions in that they are longer (~ 1 s) and have relatively smooth profiles. Despite a difference in peak luminosity of > 1E+11 between these bursts from SGR 1900+14 and cosmological GRBs, there are striking temporal and spectral similarities between the two kinds of bursts, aside from spectral evolution. We outline an interpretation of these events in the context of the magnetar model.Comment: 11 pages (text and figures), submitted to ApJ Letters, corrected erroneous hardness ratio

A converse to the ostrowski-taussky determinantai inequality

AbstractAn equality due to Ostrowski and Taussky compares the determinant of a matrix A with that of its Hermitian part (A + A∗)2, under certain conditions. A converse is now found for this inequality

The upper numerical range of a quaternionic matrix is not a complex numerical range

AbstractA recent result is that the quaternionic numerical range of a matrix with quaternion entries has a convex intersection with the upper half complex plane. This intersection is now shown to be generally not achievable as the upper half plane part of the complex numerical range of any complex matrix. A key step in the proof is that if a complex matrix has an elliptical arc as part of the boundary of its complex numerical range, then the full ellipse defined by the arc is also in its complex numerical range

Microbial genomic taxonomy

A need for a genomic species definition is emerging from several independent studies worldwide. In this commentary paper, we discuss recent studies on the genomic taxonomy of diverse microbial groups and a unified species definition based on genomics. Accordingly, strains from the same microbial species share >95% Average Amino Acid Identity (AAI) and Average Nucleotide Identity (ANI), >95% identity based on multiple alignment genes, 70% in silico Genome-to-Genome Hybridization similarity (GGDH). Species of the same genus will form monophyletic groups on the basis of 16S rRNA gene sequences, Multilocus Sequence Analysis (MLSA) and supertree analysis. In addition to the established requirements for species descriptions, we propose that new taxa descriptions should also include at least a draft genome sequence of the type strain in order to obtain a clear outlook on the genomic landscape of the novel microbe. The application of the new genomic species definition put forward here will allow researchers to use genome sequences to define simultaneously coherent phenotypic and genomic groups