IPO

Dual-Class Structure: An Option for Innovators and Market Stability

By Alvaro Pereira, L.L.M. Candidate 2016 | Posted on

A dual-class structure is a feature of corporate governance that allows for the creation of two categories of shareholders—each class with different voting rights. The increasing number of corporations adopting this type of structure before going public has recently made headlines in regulatory, professional, and scholarly circles. In spite of the critiques, there are reasons to believe that it is an important tool to promote innovation and prevent market volatility.

Much of the controversy surrounding differentiated shares boils down to discomfort with the fact that this structure inherently limits the rights of certain shareholders and broadens the rights of others. In this sense, it is no surprise that use of differentiated shares has been continuously debated since the Securities and Exchange Commission (“SEC”) unsuccessfully tried to ban them in the 1980s.

(more…)

Mutual Fund’s Devaluation of Snapchat Raises Concerns for Tech Startups

By Ben Hinshaw, J.D. Candidate 2017 | Posted on

The number of unicorns, companies valued at over $1 billion, has greatly increased, growing from 43 companies at the beginning of 2014 to around 128 companies in November.  However, these companies are often difficult to value because the shares are privately held and there is no readily available market price.  This is a serious problem for mutual funds since they are legally obligated to value each of their portfolio holdings everyday. The values can fluctuate between mutual funds as firms use different methods to value startup companies.

On November 10, 2015, Fidelity devalued its stake in Snapchat by 25%.  Fidelity also devalued several more startup companies: Blue Bottle Coffee, Dataminr, Zenefits, and others. These markdowns may suggest that the market is slowing down or that these companies’ values were inflated.  The high valuations might have also been a result of competition between investors to acquire the next big startup, driving up valuations.  Fidelity is not the only fund devaluing its stake in startups, as the asset manager Blackrock devalued Dropbox.

(more…)

Ferrari Files Its First IPO

By Madisson Goorman, J.D. Candidate 2018 | Posted on

Ferrari’s first initial public offering on October 20, 2015 was priced at $52. 10% of Ferrari’s shares are now being sold on the New York Stock Exchange. All of the shares are being sold by Fiat Chrysler Automobiles (FCA), which owns 90% of Ferrari, while Pieror Ferrari, the son of the company’s founder, owns the other 10%. The stocks are being sold in order to separate Ferrari from FCA, which is planned to happen by the beginning of next year. The remaining 80% of FCA’s stake in Ferrari will be transferred to their stockholders.

After its first trading day Ferrari closed at $55 and increased overnight to $56.75. The next important factor to be determined is if the company will be labeled a carmaker or luxury brand. If Ferrari is viewed as a carmaker its valuation greatly exceeds that of its rivals.

(more…)

Tesla’s Unreliability: Instead of Correcting Issues, Focus Shifts to New Model 3

By Matt Kempf, J.D. Candidate 2017 | Posted on

After Consumer Reports released its annual survey of vehicle reliability on October 20, Tesla Motors Inc.’s stock prices took a significant hit, dropping 6.6 percent that day, and have continued to fluctuate since.

Tesla is no stranger to this type of fluctuation nor to the impacts of publicity. In fact, in May 2013, after Consumer Reports gave the Model S the best review of any car in the magazine’s history, stock prices soared over 40 percent within days. In October of that same year, when reports of two Tesla vehicle fires became public,  stock prices dropped by 10 percent within two days, and when a third fire was reported in November of that year, prices again plummeted. Despite the fluctuations, Tesla has responded with spectacular customer service, innovation, introductions of its vehicles in new markets, and a showing of strong growth.

(more…)

Slumping IPO Market Bodes Poorly for Private Equity Firms Seeking to Cash Out

By Ziqun Guo, J.D. Candidate 2018 | Posted on

The recent slowdown of the initial public offering market has made private equity firms suffer. Private equity produce profits through two main channels: management fees based on assets, and commissions generated from the profits of the private equity funds. The latter method is their dominant moneymaking strategy. Bringing the companies in their portfolios to initial public offerings is one of the main ways that funds generate profits. As a result, a slowdown of the IPO market means that private equity firms are losing their potential profit.

(more…)

2015 Starts Strong in Europe with Four Major I.P.O.s 


By Myriam Denis, J.D. Candidate 2016 | Posted on

Last week, four companies – Sunrise Communications, Vision Express, GrandVision and Générale d’Optique – launched their shares on exchanges in the European market. Investors responded eagerly, with several offerings, such as Sunrise and GrandVision, being oversubscribed multiple times and shares moving to substantially higher levels in their debuts.

(more…)

Shake Shack’s IPO: Eating the Burger and Keeping it Whole

By Tamir Chagal, LLM Candidate 2015 | Posted on

In late January, Shake Shack, the upper tier hamburger chain, went public and “broke” Wall Street: not only was the company able to sell its shares at a price of $21 per share, twice as much as the price-per-share foreseen prior to the IPO, but it also maintained its strict “anti-activism” corporate governance regime without deterring its investors.

(more…)

Virgin America Announces Plan For Initial Public Offering

By Jessie Gao LL.M. Candidate 2015 | Posted on

On Monday November 3, 2014 Virgin America announced its plan for an initial public offering (IPO). The company plans to sell 13.1 million of the 13.3 million shares in the IPO to raise about $320 million. The shares are expected to be priced at $21 to $24 per share, which would value the company at approximately $1 billion. According to the filing with the Securities and Exchange Commission, the raised capital will be used for expansion of new routes and improving inflight entertainment systems.

(more…)

Roku Likely Working on Confidential IPO

By Richard Johnson, J.D. Candidate 2017 | Posted on

Roku, the streaming content device maker, is reportedly in the works with underwriters to take the company public. The Saratoga-based company, created in 2008 by former Netflix vice-president Anthony Wood, has already proved to be very successful. Roku generated $190 million in revenue last year alone and has raised over $150 million in private capital. However, many believe the time is right for an IPO for two reasons: the need to stay competitive moving forward and the success of recent consumer electronic IPOs.

(more…)