Business Regulation – Page 10 – Marquette University Law School Faculty Blog

Protecting the Public from (Certain) Emerging Growth Companies

Post author:Christopher Flowers
Post published:November 26, 2013
Post category:Business Regulation Corporate Law Public

Part one of this blog post concluded that Fantex’s IPO represents an unintended consequence of the 2012 JOBS Act. The costs imposed on startups attempting to go public are significant, and the burden of complying with mandatory disclosure laws can deter even the most-attractive startups from commencing an IPO. The JOBS Act is intended to decrease the burden on startups attempting to raise necessary capital by reducing the financial disclosure requirements normally imposed on public companies.

One way the Act reduces disclosure is through the status of “emerging growth company.” Most notably, an emerging growth company is defined as an entity with less than $1 billion in annual revenue. By falling within this broad definition, a startup may take advantage of reduced disclosure requirements for up to five years.

Based on this $1 billion threshold, the definition of emerging growth company is broad enough to encompass companies either experiencing an accelerated growth rate or with high-growth potential. Unfortunately, Fantex also falls within this broad definition of emerging growth company, as noted in its prospectus. Therefore, the real question is whether the definition is too broad so that companies with little, or no, demonstrated growth are being granted the same access to the investing public as companies that are actually growing.

Adding Context to the Fantex Public Offering

Post author:Christopher Flowers
Post published:November 18, 2013
Post category:Business Regulation Popular Culture & Law Public Sports & Law

Part 1 of 3: Legitimate or Emotional Investment?

During the NFL season, millions of fans are emotionally invested in their favorite teams and players. But since Fantex, Inc. filed a preliminary prospectus with the SEC on October 17, the notion of financially investing in professional athletes has generated considerable buzz. After letting the dust settle, a careful reading of the company’s prospectus reveals numerous red-flags regarding this IPO – most notably to potential investors.

At first glance, Fantex’s strategy to raise capital appears pretty straightforward. The company will raise $10 million by selling ten-dollar shares to the general public. Fantex also entered into a “brand contract” with Houston Texan’s running back Arian Foster. Under the terms of this contract, Fantex will make a one-time, $10 million payment to Foster in exchange for 20% of his future earnings. The company expects to enter into similar brand contracts in the future with not only athletes, but also entertainers and other high-profile individuals. If Fantex’s efforts are successful, it will issue dividends to investors. Therefore, the more shares that are purchased, the more dividends investors can expect to receive – right?

As with most IPOs, nothing is ever quite so clear. The details in the prospectus reveal that Fantex lacks any clear business model. More importantly, there is no clear plan for generating a return for investors. Based on the prospectus, it is safe to conclude that any reasonable investor would not purchase shares under this IPO. However, this offering is perfect for those investors who do not actually intend to make any profit.

Ice Gets Iced

Post author:Michael M. O'Hear
Post published:August 14, 2012
Post category:Business Regulation Criminal Law & Process Federal Criminal Law & Process Federal Sentencing Public U.S. Supreme Court

Earlier this summer, in Southern Union Co. v. United States (No. 11-94), the Supreme Court seemed to reverse course yet again in its on-and-off revolution in the area of jury-trial rights at sentencing. The revolution began with Apprendi v. New Jersey (2000), which held that a jury, and not a judge, must find the facts that increase a statutory maximum prison term. The revolution seemed over two years later, when the Court decided in Harris v. United States that no jury was required for mandatory minimum sentences. But, another two years after that, in Blakely v. Washington, the revolution was back on, with the Court extending Apprendi rights to sentencing guidelines. Blakelywas especially notable for its hard-nosed formalism: Apprendi was said to have created a bright-line rule firmly grounded in the framers’ reverence for the jury; we are not in the business, declared Justice Scalia for the Blakely majority, of carving out exceptions to such clear rules in the interest of efficiency or other contemporary policy concerns.

Then came Oregon v. Ice in 2009, which seemed to signal that the Court had again grown weary of the revolution.