Yearly Archives: 2010

Is Facebook already a public company?

Hot startup companies face a dilemna: how to generate liquidity for early stage investors and employees without conducting an IPO, or “initial public offering.”

An IPO requires the preparation of a prospectus in a process that is overseen by investment bankers, lawyers, accountants, the stock exchange and, not least, the SEC. Not until the SEC declares a registration statement (which includes the prospectus) prepared by the company and its legal and financial advisors “effective” can a company actually sell its shares to the investing public.

But when that prospectus is filed, even if in early draft form, it becomes public and is available on the SEC’s EDGAR database. And that means the core business model of the company is available for competitors to review.

Some years ago Google ran into a version of this problem. It had handed out more than $80 million of options to buy stock to employees and consultants. At a certain point the company crossed the threshold of 500 investors set by the SEC and, as well, it ran afoul of a ceiling on securities allowed to be issued to employees and consultants by the SEC without disclosure to them.  Google was therefore obligated to file an annual report roughly equivalent to a prospectus or provide recipients of the stock options with details about the company’s business. They did not do so and that led to an SEC investigation and in turn the SEC slapped their wrist, extracting a promise not to do it again.

Of course, by then Google had gotten away with what they had wanted to do: time their IPO without giving up the ability to hand out shares prior to filing their prospectus.

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Remembering Ron Santo

I knew Ron Santo, first, from a distance, as a lifelong Cubs fan and then, when he retired, as one of his regular caddies when he turned to golf at the local country club.

He was a generous and warm person with a giant personality who dominated the golf course the way he dominated the field. Within a few short years he was a scratch golfer and club champion, regularly smashing 300 yard drives down the center of the fairway, in an era long before 300 became the norm among professional golfers – prima facie evidence of his tremendous athletic ability.

He was a breath of fresh air in that all too clubby and cloistered leafy green suburban environment.

He will be missed.

Ron Santo, Longtime Cubs Stalwart, Dies at 70 – NYTimes.com.

Chalmers Johnson, influential scholar and critic of US foreign policy, dies at 79

Some 20 years ago, I was a visitor at the Graduate School of International Relations and Pacific Studies on the U.C. San Diego campus. My office was across the hall from that of Chalmers Johnson. This was just before he did something that all too rarely happens in academia – he walked away from the field of political science because he saw the malicious influence of narrow rational choice theory.

A decade before 9/11 he lamented the deterioration in qualitative analysis and area studies that “rat choice” had caused in the field. In part this was linked to a wider problem: an obsession with quantitative and empirical analysis in the social sciences generally.

His perspective influenced my approach to human rights theory expressed in this review essay on the impact of realism on human rights.

More well known is Johnson’s transition from a fairly conservative figure – one who was known for an occasional crude and politically incorrect joke when he was on the Berkeley faculty and served as an advisor to the CIA – to a bold and provocative theorist of the left, strongly critical of global U.S. military power.

Chalmers Johnson obituary: Chalmers Johnson, influential scholar, dies at 79.

“The Big Fail” – a legal black hole in the economy

Adam Levitin explains why the legal problems at the heart of the real estate crisis may end up making the last three years look like a speed bump.

The problem is that our banks turned themselves into designers of loans that they then were supposed to have sold off in packages to outside investors. Now that that homeowners are failing to pay their mortgages it turns out the banks may not have ever really transferred the mortgages as they promised.

So who is going to have to cover the losses now?

Here is one tantalizing clip:

The banks are in serious trouble if there are widespread securitization fails. If the loans weren’t transferred to the securitization trusts, then they are on bank balance sheets, which means that (1) the losses on the loans are the banks (to be sorted out with the investors), and (2) the banks need to be holding capital against the loans that haven’t gone into foreclosure.  Depending on the scale of the problem, the banks might not have enough capital to cover the securitization fails….

The Big Fail – Credit Slips

“Putting the Brakes on the GM IPO Fervor”

One of the most celebrated IPO’s in recent business history will likely be completed tomorrow. Underwriters bought all the shares on offer from GM today and will resell them to individual and institutional investors over the next few days.

But the Wall Street Journal notes some serious risks at the new company and my recent Research Note on the GM/UAW VEBA points out the continuing ties between GM and autoworker retirees.

Writing on the Wall: Putting the Brakes on the GM IPO Fervor – WSJ.com.

Burmese Victory for Human Rights Movement: Aung San Suu Kyi is Free

a-national-league-for-dem-006The international human rights movement can claim an important victory today with the release from a long house arrest of Nobel Peace Prize winner Aung San Suu Kyi, the leader of the Burmese democracy movement. Coming as it did in the wake of the granting of this year’s Nobel Prize to Chinese imprisoned human rights activist Liu XIaobo it is a sign of the weakening of China’s hold on Asia generally. China has been a big financial supporter of the Burmese military dictatorship and had reacted harshly when Xiaobo was given the Prize.

Many thousands of people around the world took part in the various campaigns to support Suu Kyi’s release.

Here in the US, I helped out in a small way during a legal battle against oil giant Unocal which relied on the Burmese military to dragoon Burmese workers into helping build a natural gas pipeline. The suit led to a successful financial settlement to benefit the Burmese people. The international labor movement pressured the regime through the ILO and the UN system. And so on. This loosely organized but global effort has shown it can face down the most repressive of regimes.

It can only be hoped that the emergence of a democracy movement in Burma can in turn encourage efforts in Vietnam, China and elsewhere in Asia.

Lessons from the election: “Why center-left parties are collapsing”

Michael Lind of the New America Foundation puts his finger on something deeper afoot in the wake of the electoral debacle for the liberal left.

He points to the tension between class politics that animates working class voters in Europe and the US versus the “multikulti” politically correct green politics so much in favor with the Democratic Party elite.

Here is one snippet:

“In general the parallels between the U.S. and Europe are striking. In
the U.S., as in Europe, the right is divided between a pro-business
right promoting policies of austerity and a populist, nativist right
energized by opposition to immigration and multiculturalism,
particularly where Muslims are involved. In the U.S., as in Europe,
the upper-middle-class activists and intellectuals of the center-left
devote far less energy to traditional social democratic issues like
social insurance and the minimum wage than to non-economic causes like
renewable energy, mass transit, the new urbanism, gay marriage,
identity politics and promotion of amnesty for illegal immigrants. On
both continents, conservatism is becoming more downscale while
progressives are increasingly upmarket.”

Why center-left parties are collapsing – War Room – Salon.com.