Corporate Finance & Securities

General Characteristics of Preferred Stock

We’re following up Thursday’s post about Apple’s attempt to prohibit the company from being able to authorize preferred stock by amending its charter documents  with this post, which discusses some of the general characteristics of preferred stock and some of the key terms that affect the value of preferred stock.

General Characteristics of Preferred Stock

Preferred stock is often considered a hybrid security as it offers features of both bonds and common stock. For example, preferred stock is like a bond in that it typically has a fixed-percentage dividend, and it is similar to common stock in that the preferred holder cannot receive a dividend unless it is earned and declared by the corporation. Traditionally, private equity investors are keen on dividends....

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Litigation & Dispute Resolution

No Preferred Stock? No Problem for Apple; Einhorn Disagrees

According to a proxy statement issued by Apple Inc., the computer (and mobile device) giant has announced that it does not intend to issue preferred stock in the future and believes it is appropriate to eliminate an existing provision permitting the issuance of preferred stock at its discretion. The proposed amendment to the company’s governing documents would require Apple to seek shareholder approval prior to issuing any preferred stock in the future.

Greenlight Capital Inc.’s David Einhorn is protesting the amendment. Einhorn has been discussing creating preferred stock  that would be distributed at no cost to Apple’s shareholders and would provide significant dividends. He urges that to eliminate the board of directors’ ability to issue preferred stock without shareholder approval will...

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Corporate Finance & Securities

NASAA to Investigate Further into Early Crowdfunding Platforms Jumping the Gun

I read a Wall Street Journal article today about the recent investigation into websites claiming to be crowdfunding platforms. Of the reported 9,000 websites that contain the word “crowdfund” in their website names, the North American Securities Administrators Association (NASAA)—the organization that represents state securities regulators—has investigated roughly 2,000, and plans to give a closer look at 200 of those.

Why the investigation in the first place? Well, many securities regulators are concerned that the “relaxed” rules governing securities offerings for private companies might present an opportunity for fraud. NASAA has decided to look further into these crowdfunding sites in an effort to reduce the likelihood of fraud and crack down on those companies that have jumped the gun on crowdfunding...

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Business Startup

iVLG News Roundup Week 51: Nook’s New Shareholder; Porsche Case Dismissed; HomeStreet Bank Off the Hook; Etc.

International News

British Publisher to Purchase Share in Nook Pearson, a British publisher and education company, made public its $89.5 million investment in Barnes & Noble’s Nook tablet. In exchange, Pearson will receive a 5% stake in the business. Barnes & Noble recently warned its shareholders that its e-reader business would fall short of its annual projections and that holiday sales are lower than expected.

In April, Microsoft invested $300 million in Nook. Together with Pearson’s investment, the Nook business is valued at $1.8 billion (more than Barnes & Noble’s entire market value of $913 million).

National News

Porsche Wins Appeal; Hedge Fund ‘Short Squeeze’ Lawsuit Dismissed In the long-running legal battle regarding Porsche’s takeover of Volkswagen, there is finally a bit of clarity. A New...

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Business Startup

iVLG News Roundup Week 48: Crowdfunding Platforms Raise Capital; Insider Trading Scandal; Proposed Arena Images; Costco Criticized

Crowdfunding News

WeFunder Becomes the Latest Crowdfunding Platform to “Get Funded”

A recent article on The Crowd Cafe, a crowdfunding-centric blog published by Jonathan Sandlund, lists the crowdfunding platforms that have raised capital. WeFunder, the latest platform to close its seed round, raised $550,000 from 58 different investors. According to WeFunder’s email blast, the investments ranged from $100 to $100,000, and half of the investors were un-accredited.

What does this mean? It signals that people are excited for the changes that are on the horizon for the funding landscape. Look at FundersClub, they’ve raised more than $6.5 million between their pre-seed and seed round. That’s serious money!

Securities Regulation

Ex-Rochdale Securities Trader Arrested for $1 Billion Trade in Apple

According to a criminal complaint filed Tuesday by the U.S. attorney...

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Corporate Finance & Securities

Changes On the Horizon for Filing Private Placement Memoranda

Beginning on Monday, December 3, 2012, members of Financial Industry Regulatory Authority (FINRA) must file a copy of any private placement memorandum, term sheet, or other offering document used within 15 calendar days from the date the sale took place; the filer will have a continuing obligation to file any materially amended versions of the offering documents; if no offering documents are used, it must indicate that it did not do so; and filings must be made electronically with FINRA through the FINRA Firm Gateway.

FINRA has taken active steps to increase transparency and investor protection in private placements. In addition to the Rule 5123 filing requirements, Rule 5122 establishes standards on disclosure, use of proceeds, and a filing requirement for...

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Corporate Finance & Securities

FINRA Guidance for Private Placement Due Diligence

If you’ve been following securities regulation over the past three years, you’ve likely noticed the increased FINRA scrutiny on private placement due diligence. Especially with respect to broker-dealers, the Financial Industry Regulatory Authority has cracked down on numerous firms that fail to take reasonable steps to investigate issuers before recommending an issuer’s securities to the broker-dealer’s  clients. There is the potential for an increase in private placements due to the recent legislation passed, the JOBS Act. Today’s post revisits some of the best practices that FINRA suggested in its Regulatory Notice 10-22, released in April 2010.

Reasonable Investigation Depends on the Circumstances In general, broker-dealers are required to perform a reasonable investigation concerning the issuer and its management, the business prospects of...

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Corporate Finance & Securities

Material Omissions in Private Securities Offerings

Under Washington law (RCW 21.20.010), it is unlawful for any person to, in connection with the offer, sale or purchase of any security, directly or indirectly make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading.

Restated, someone selling an interest in a company to an investor cannot lie about or fail to disclose an important fact. If the securities issuer makes an untrue statement or omission, the investor may be entitled to recession–meaning that the investor can get the money they invested back, plus interest.

What makes a fact or omission material? Facts are material if a...

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Business Startup

iVLG News Roundup Week 40: Mergers & Acquisitions, Securities Regulation, and Housing

Mergers and Acquisitions

Exxon Mobil Buys Canadian Oil and Gas Company Oil giant Exxon Mobil agreed to terms on Wednesday to purchase Canadian oil and gas company Celtic Exploration. Exxon is paying roughly $3.1 billion in cash and stock. Exxon has been actively seeking to expand its presence in the energy-rich shale that is in western Canada.

The deal includes Exxon paying about $24.5 Canadian dollars ($24.92 USD) per share, which is roughly 35 percent above the Canadian company’s closing price. Celtic investors will also receive .5 of a share in a new company that will be led by Celtic’s current management team.

Microsoft Makes Two Deals in Two Days Microsoft announced Wednesday that it has closed a deal to acquire MarketingPilot Software, LLC, a...

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Corporate Finance & Securities

SEC Hands Out Hefty Reward to Whistle-Blower

The Securities and Exchange Commission reported Tuesday that it handed out the first reward to a whistle-blower who helped federal securities regulators shut down an investment fraud. Under the SEC’s new whistle-blower reward program, the commission cannot disclose any information about the firm involved, including the information that the whistle-blower provided, but it did disclose that the case has led to more than $1 million in sanctions.

The new reward program was created as a part of the Dodd-Frank overhaul of the financial industry. The $50,000 payout—which is roughly 30 percent of the amount collected in the enforcement action—to the whistle-blower is the maximum reward under the new program. However, as the sanctions increase and more money is collected, the payout...

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