Put This in Your PIPE . . .

3L Douglas Hoffer has a new paper on SSRN describing and defending “PIPE financing” — a form of corporate financing that has taken off in the past fifteen years.  PIPE financing permits corporations to raise money by selling equity through a two-step process that diminishes the regulatory burdens normally associated with public offerings. 

PIPE deals have drawn negative comments from other scholars and the SEC, but Douglas thinks the critics have failed to appreciate the important benefits of PIPE financing. His paper, entitled “Quagmire: Is the SEC Stuck in a Misguided War Against PIPE Financing?,” will be published in Transactions: The Tennessee Journal of Business Law.  The abstract appears after the jump.  

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Judge Crabb’s Ambitious Establishment Clause

I am not going to go ballistic over Judge Barbara Crabb’s decision that the National Day of Prayer – an event that has gone on for 58 years and mirrors, in many respects, actions of our federal government throughout the history of the Republic – violates the Establishment Clause.

She is, I think, wrong and may have been well served to have given more attention to a principle of legal analysis that has served me over the years: The law can be an ass, but it doesn’t always have to be. Invalidating the National Day of Prayer seems intrinsically wrong and that sense, while not dispositive, needs to be given attention.

But Judge Crabb’s decision rehearses the doctrine and the various arguments for and against the constitutionality of the matter. She did not mail it in. She did not ignore the obvious arguments against her decision, even if I don’t think she handled them in the right way.

It would be hard for me to conclude otherwise. I have argued — here and here — that there is a trail in our Establishment Clause jurisprudence (and various trails, rather than structure, is all we have in this area of the law) that is overly ambitious. It seeks to protect against relatively small religious insult and utterly fails to deliver it because, to be consistent, would paralyze the government.

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Was an Action against Goldman Sachs Inevitable?

While reading through news on the SEC’s case against Goldman Sachs, I can’t help but wonder if the charge would have been brought regardless of what happened in the market.

The action against Goldman Sachs comes from their arrangement and sale of mortgage backed collateralized debt obligations (CDOs).  In 2006, John Paulson, approached Goldman Sachs with an interest to short housing prices.  Paulson clearly believed at the time, correctly, that housing prices were at unsustainable levels; he believed that there was a bubble in the market, and he wanted to make a bet that prices would decrease.  In order for Paulson to make a bet against housing prices, there needed to be somebody on the other end to make a bet that housing prices were going to increase.  The very essence of a CDO is that there necessarily must be two opposing parties to take different views on a future direction of a product or market. 

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