Airbnb Raises $100 million in Latest Round of Funding

By Taylor Arabian, J.D. Candidate 2016 | Posted on

Airbnb, the San Francisco-based tech company that allows homeowners to rent their residences to visitors, recently completed a new round of funding that raised more than $100 million. This round of financing comes on the tail of a similar round this summer that raised more than $1.5 billion for the late-stage startup. The company’s valuation of $25.5 billion remained steady through the latest round.

In its latest quest for investor financing, Airbnb touted strong year-over-year growth and promising revenues to attract investors. In investor presentations, the company claimed $340 million in third-quarter revenues from approximately $2.2 billion in bookings. Those numbers were up sharply compared with the same period last year. Moreover, the company increased its 2015 revenue projections to $900 million, a $75 million increase over the $825 million projection issued in July.

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Pfizer and Allergan to Merge in $160 Billion Deal

By Vartika Jain, LL.M. Candidate 2016 | Posted on

On November 23, 2015, pharmaceutical giant Pfizer, Inc. announced a $160 billion merger deal with Allergan Plc that will create the world’s largest drug maker by sales, keeping pace with the unprecedented surge in healthcare mergers and acquisitions in 2015.

The combined entity will be renamed Pfizer Plc and its headquarters will be in Ireland, where the corporate tax rate is 12.5 percent, compared to 35 percent for a comparably sized company in the U.S. Post-merger, Pfizer shareholders are expected to own about 56 percent of the combined company, with the remaining 44 percent owned by Allergan shareholders. Expected to close in the latter half of 2016, the transaction is subject to certain closing conditions, including receipt of regulatory approvals in the U.S. and the European Union and the receipt of Pfizer and Allergan shareholders’ votes.

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Tax Bill Threatens the Dell-EMC Merger

By Aicha Ahardane, LL.M. Candidate 2016 | Posted on

Last October, Dell offered to buy EMC for $67 billion, making it the largest tech merger ever. This merger will create a new technology giant that will sell both consumer and IT products, ranging from personal computers to data storage gear for corporate data centers.

To finance this acquisition, Dell will use a combination of borrowed cash up to $49.5 billion and tracking stocks in an EMC subsidiary called VMware. The offer valued EMCat $33.15 a share, for which Dell will pay $24.05 in cash per share and give EMC shareholders a special stock that tracks the share price in VMware. Intended to offset the amount of debt Dell will take on, those tracking stocks seriously threaten the feasibility of the deal because of a possible $9 billion tax bill.

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Emergency Hearing Set for FanDuel and DraftKings

By Dori Kojima, J.D. Candidate 2016 | Posted on

On Wednesday, November 25th, while many households prepare for the Thanksgiving holiday, New York-based users of fantasy sports companies, FanDuel and DraftKings, will also be awaiting the outcome of an emergency hearing before the New York Supreme Court. The hearing could decide whether the companies receive a preliminary injunction to operate while the illegal gambling cases against them are pending, a process that could take over a year.

The hearing will be the latest match up in the ongoing public legal battle between New York Attorney General Eric Schneiderman and the two largest daily sports fantasy companies. On November 10th, Schneiderman sent “cease-and-desist” orders to FanDuel and DraftKings, instructing the companies to stop accepting illegal bets from New York residents. In response, FanDuel and DraftKings requested relief through a temporary restraining order to stop Schneiderman until the companies could present their cases. The court denied the companies’ requests but set the date for the emergency hearing.

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Federal Circuit Rules that ITC Lacks Regulatory Power Over Digital Imports

By Whitney Florian, J.D. Candidate 2017 | Posted on

On November 10, 2015, the Federal Circuit ruled in ClearCorrect Operating, LLC v. ITC (“ClearCorrect”) that the U.S. International Trade Commission (“ITC”) does not have jurisdiction to regulate digital data imports. The court held that the ITC’s regulatory power is limited to “material things,” and electronically transmitted digital data is not a “tangible good.”

The decision overturned the ITC’s April 2014 finding that ClearCorrect was barred from importing data sets converted from scanned models of patients’ teeth. The ITC had found that ClearCorrect infringed seven of Align Technology’s patents by using the data sets to create dental aligners, a method to reposition teeth, via 3D printing.

The appeals court explained that Section 337 of the Tariff Act of 1930 was enacted to stop the importation of articles involved in unfair trade practices. “Articles” was defined by the court as tangible, “material things,” which do not include non-physical articles such as electronic transmissions of data sets.

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New Stock Exchange Could Use “Speed Bump” to Combat High-Frequency Trading

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

Recently, an investment company known as Investor Exchange, or IEX, proposed a new solution to the problems created by increasingly complex and high-speed stock markets. The firm plans to create a new American stock exchange that use a 350 microsecond “speed bump” as a limit for traders to place and cancel orders. IEX has proposed to create such a tool within the next five years to fight against high-frequency trading.

This proposal has already drawn some criticisms. Notably, other large stock exchange companies and high-speed trading firms have argued that this “speed bump” will make the stock market more complicated. The extra complexity might therefore benefit one side of the market over the other. Moreover, ordinary investors might enjoy trading immediately at the market price.

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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.

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Treasury Releases New Guidance on Inversions

By Vinh-Khoi Le, J.D. Candidate 2016 | Posted on

On Thursday, November 19, 2015, the Treasury Department issued a second notice designed to limit the tax benefits of overseas tax-inversion deals. This notice is a continuation of the US government’s recent anti-inversion actions, including the notice that the Treasury Department issued on September 22, 2014.

“Last year, Treasury took targeted action to address inversions,” said Treasury Secretary Jacob J. Lew. “This notice made a real difference by reducing some of the economic benefits of inversions, resulting in a decline in the pace of these transactions. This next action makes it even harder to invert, and further reduces the tax benefits for U.S. companies. While we intend to take additional action in the coming months, there is only so much the Treasury Department can do to prevent these tax-avoidance transactions. Only legislation can decisively stop inversions. The Administration has been working with Congress in an effort to reform our business tax system and address the issue of corporate inversions‎.”

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Global Financial Policy Makers Push Closer to the End of “Too Big to Fail” Banking Era

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

An international group of financial policy makers, the Financial Stability Board (FSB), designed a framework seeking to keep 30 of the world’s biggest banks from becoming “too big to fail” and having to resort to taxpayers-backed bailouts in the event of a future financial crisis. The “too big to fail” conundrum refers to the government having to bail out big banks because letting them fail would inflict collateral damage too severe for the economy to recover.

The proposed rules would require these banks to maintain “capital buffers” capable of absorbing potential losses when a bank is failing, thus preventing the spreading of further pressure in the global banking system. Most of this buffer would come in the form of shareholders’ equity as well as long-term debt issued to investors. By making banks sell bonds explicitly exposed to losses, the risk would shift from the government to be borne by the banks’ investors, and taxpayer-funded bailouts would, in theory, no longer be necessary.

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U.S. Proposes to Cut Back on Solar Installation Tax Credits by 2017

By Kristofer Hatch, J.D. Candidate 2017 | Posted on

By the end of next year, the U.S. will cut back on tax credits for wind and solar.  Solar power’s most prominent tax credit will expire at the end of 2016, with the most significant tax credit for wind power having already expired.

Currently, federal subsidies provide residential solar installers with a thirty percent tax credit through the solar investment tax credit (ITC).  The ITC has been extended in the past, and has helped solar installation grow by over 1600% since its inception in 2006.  At the end of 2016, this subsidy will be reduced down to ten percent.

These cutbacks on credits for solar energy could have steep consequences on the solar industry in the United States.  Elon Musk has blamed the closing of Zep Solar UK, a subsidiary of his US-based parent company, Solar City, on cuts to solar subsidies in the UK.  Other markets however, have managed quite well, despite a lack of tax credits.  Solar energy in Chile, for example, has fared much better without governmental support: total installed solar capacity increased from less than 4 Megawatts to more than 220 Megawatts in a year, without the support of subsidies.

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