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Course Correction: Why “Ordinary Course” Covenants in Acquisition Agreements Should be Drafted Carefully

Should a buyer be allowed to walk away from an acquisition if an extraordinary event occurs between signing and closing that forces the target company to take emergency remedial measures outside its ordinary course, even if...more

Comments from the SEC(nut) Gallery: SEC Comment Letters Focus on SPAC Conflicts of Interest

Ever since the SPAC market exploded in late 2020 and early 2021, the SEC has sounded alarm bells through investor alerts, staff statements and public comments.  In March of 2021, it warned investors not to invest in SPACs...more

Crypto Reform Goes to Congress: Proposed Three-Year Safe Harbor for Distribution of Pre-“Network Maturity” Digital Tokens

Background: Crypto Catch 22 - Followers of the SEC’s efforts to regulate digital tokens will recall former SEC Corp Fin Director William Hinman’s speech at the June 14, 2018 Yahoo Finance Conference in which he introduced...more

Series LLCs, Serious Risks

Lately I’ve been approached by clients and potential clients about series LLCs, so I thought it would be worth blogging about.  Basically, a series LLC is an LLC that may create one or more series, each generally having...more

“Do Your Homework!”: SEC Order Sends Strong Message to SPAC Participants on Due Diligence

The Securities and Exchange Commission announced on July 13, 2021 that it settled fraud charges against a special purpose acquisition company, its sponsor, its sponsor’s CEO and its proposed merger target for making...more

First Ever SEC Registered Digital Token IPO May Bring Clarity to Blockchain Asset Industry

On May 3, 2021, blockchain-based trading platform operator INX Ltd. announced it had completed its initial public offering of digital tokens, raising approximately $85 million in the IPO from over 7,200 institutional and...more

Securities Safety Check for New TV Series “Unicorn Hunters”

A new reality streaming television series called Unicorn Hunters debuted last week in which startups will pitch to a panel that includes Apple co-founder Steve Wozniak, and the panelists after some grilling of the...more

Issuers May “Test-the-Waters” Before Choosing a Securities Exemption

Perhaps the most vexing threshold issue faced by any company considering a capital raise is which securities exemption to pursue.  The chosen exemption largely depends on the targeted amount of the raise, as well as the...more

SEC vs. Ripple Could Make Waves in Cryptocurrency Market

On December 2, the Securities and Exchange Commission filed a lawsuit against Ripple Labs, Inc. and two of its executives alleging they offered and sold over $1.38 billion of digital asset XRP without registration or...more

Relief for Pre-Verified Accredited Investors May Encourage Rule 506(c) Offerings

It’s pretty common for issuers in follow-on offerings to solicit investors from previous rounds first.  Indeed, doing so is often mandatory when early investors have preemptive rights. ...more

Why Private Capital and Crowdfunding Markets Should be Nervous about President Biden’s Regulatory Freeze

A freeze on government regulation is generally perceived by most people as being a positive development for private enterprise.  Not necessarily so, however, when the regulation being frozen is itself a reform of preexisting...more

Strict Traffic Rules for New Crowdfunding Vehicles – Part Three of Exempt Offering Amendments Deeper Dive

You just raised $1 million in your crowdfunding offering under Title III/Regulation CF.  That’s the good news.  The bad news?  You now have over a thousand shareholders on your cap table, making it unwieldy, an administrative...more

“Demo Days are Here Again”: Part Two of Exempt Offering Amendments Deeper Dive

At the 1932 Democratic National Convention, the live band at one point burst into “Happy Days are Here Again”, FDR’s favorite, drawing raucous cheers from convention delegates.  It went on to become the Democratic Party’s...more

Exempt Offering Amendments Deeper Dive, Part One: Higher Offering Caps

Last month, The Securities and Exchange Commission passed sweeping reforms of the rules governing exempt offerings (the “2020 Reforms”) to make it easier for issuers to move from one exemption to another, to bring clarity and...more

Significant Exempt Offering Rule Reforms Approved by SEC to Facilitate Capital Formation

On November 2, 2020, the SEC adopted significant rule amendments to simplify, harmonize and improve the exempt offering framework to facilitate capital formation and investment opportunities in startups and emerging...more

“Kik” in the Butt: Court Decision Against Initial Coin Offering Could be Opportunity for Others

On October 21, 2020, the United States District Court for the Southern District of New York entered a final judgment on consent against Kik Interactive Inc. to resolve the Securities and Exchange Commission’s charges that...more

SEC Proposes Much Needed Finder Exemption, and Paul Anka Must Be Singing

Finders play a vital role in introducing startups to potential investors.  Yet the general requirement that persons soliciting investors must register with the Securities and Exchange Commission as broker-dealers and be...more

Private Market Investing Not Just for the Wealthy Anymore?

The Securities Exchange Commission expanded the definition of “accredited investor” by adding new categories of investors that have sufficient investment knowledge and expertise to participate in private investment...more

Management and Common Stockholder Resistance to Acquisitions, and Using Carve-Outs to Overcome It

This past June, autonomous vehicle technology startup Zoox agreed to be acquired by Amazon for a whopping $1.3 billion.  Time for the common stockholders to pop the champagne, right?  Not exactly, according to a complaint...more

“Whoever has the Gold, (Once Again) Makes the Rules”: VC Deal Terms Likely to be More Investor Favorable

It’s no shocker that the Coronavirus pandemic has slowed down venture capital investment dramatically, with 2020 now on pace to be well below the high levels of the past couple of years.  According to Pitchbook, VC deal flow...more

The Upshot of Down Rounds

The impact of the Coronavirus and COVID-19 on venture capital investment will likely be similar to what we saw in the aftermath of the 2008 recession and the 2001 dot-com meltdown. VC investors will redirect their attention...more

COVID-19 Capital Needs Addressed by Temporary Relaxation of Title III Crowdfunding Rules

Title III crowdfunding may be an attractive capital raising alternative during the current Coronavirus pandemic because it allows companies to use the internet to solicit potential investors and not be restricted to...more

Restoring Incentives of Underwater Stock Options

COVID-19 induced declines in private and public company valuations have left many employee stock options “underwater” or “out-of-the-money”, i.e., exercise prices exceeding fair market value. This is a problem for employees...more

Shareholder Meetings in the Age of COVID-19

Among the many challenges companies are facing during the COVID-19 pandemic is how to conduct their shareholder meetings. Current social distancing requirements are effectively forcing companies to choose between postponing...more

No Satisfaction: Absence of Affiliation Rule Waiver Leaves Most VC-Backed Companies Ineligible for Paycheck Protection Plan Loans

Venture-backed companies did not receive the relief they had hoped for this past Friday, April 3rd, when the Small Business Administration (“SBA”) issued affiliation rule guidance on the Paycheck Protection Program (“PPP”)...more

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