On Friday, September 19, people from Beijing to New York could be seen celebrating the success of the Alibaba IPO. For months leading up to the offering, analysts and commentators had cautioned U.S. investors to be wary of the Chinese e-commerce giant. The skepticism was largely due to questions concerning the company’s corporate governance structure, known as a variable interest entity or “VIE”. The initial numbers and the subsequent celebrations, however, suggest that investors are not concerned. The stock (ticker symbol “BABA”) finished the trading day at $93.89, 38% above the initial set price of $68 and well above the average 26% IPO jump for U.S. listed technology and internet deals this year. This puts the company’s market value at $231 billion and, depending on whether underwriters exercise their stock options over the next couple of weeks, could make Alibaba the largest ever IPO in U.S. history. Despite the seemingly successful offering, however, the jury is still out on the soundness of individuals investing in VIEs, as it is yet to be seen whether the resurfaced questions surrounding the structure will spark any action by regulators.
Why is this decision significant? Without credit-bidding, vulture funds may have a difficult time profiting from their investments in situations where they hope to use credit-bidding to acquire a debtor’s assets in a Section 363(b) sale. Section 363(b) of the bankruptcy code permits a debtor to sell some or all of its assets outside the normal course of business during a Chapter 11 reorganization. Section 363(k) allows secured creditors to use the value of their claim as credit in purchasing a debtor’s assets during a 363(b) sale. While credit-bidding was originally intended to protect secured creditors, it has been used as an offensive weapon by vulture funds aiming to profit off of secured debt acquired at discounted rates. Section 363(k)(b), however, allows bankruptcy courts to limit or eliminate the right to credit bid for cause. In Fisker, the bankruptcy court saw an uncompetitive auction as being enough cause to limit the amount Hybrid could credit-bid.Now is an interesting time to home in on bankruptcy cases where credit-bidding is a focal point, as it is likely that a big decision will soon resolve many of the questions the Fisker court left open.
The Dodd-Frank Wall Street Reform and Consumer Protection Act has many new or updated rules and regulations for organizations in the financial markets. One in particular is Title Seven, which gives the Commodity Futures Trading Commission (“CFTC”) the authority to set rules for swap dealers and major swap participants regarding the records they are required […]
The new registration exemption in connection with Rule 506 offerings and crowdfunding portals significantly expand the scope of activity that non-broker-dealer registered entities may conduct. Section 201(c) of the JOBS Act provides that in connection with securities offered and sold in compliance with Rule 506 of Regulation D certain intermediary parties will not be subject […]
The JOBS Act Turns One-Year-Old and It’s Clear that this Ill-Conceived “IPO On-Ramp” Needs an Off-Ramp
In the wake of a sweeping financial crisis that crippled U.S. capital markets and left millions of Americans out of work, Congress passed the Jumpstart Our Business Startups Act in 2012 to revitalize the economy. Commonly known as the “JOBS Act,” the statute was intended to create jobs for Americans by improving access to public […]
On February 27th the Second Circuit Court of Appeals heard oral arguments between plaintiff-appellees, hedge funds NML and Aurelius, and appellants led by the Republic of Argentina (Argentina). Argentina is joined by Bank of New York Mellon (BNY Mellon), the Exchange Bondholders Group, and Fintech Advisory. The appellant’s are challenging the November 21st ruling by […]
On February 11, 2013, The Fordham Corporate Law Center and the Fordham Journal of Corporate & Financial Law, in conjunction with the Max-Planck-Institute Luxembourg for International, European and Regulatory Procedural Law, held a symposium on global financial regulation. For more scholarship on the future of EU financial regulation, please see this article from the Oxford Journal of Legal […]
William Ackman is so sure that Herbalife is a fraudulent company that he is literally willing to bet a billion dollars on it, and in December 2012, that is just what he did. Herbalife, a 30 year old food retailer of weight management shakes and supplements, is estimated to be worth billions and is openly […]
High frequency trading (“HFT,” and also known as low-latency trading) is the use of automated programs to execute securities orders rapidly, generally to take advantage of small market disparities. Importantly, statistics indicate that HFT currently comprises approximately 50% to 70% of United States daily equity volume. While HFT has undeniably provided important benefits for investors, […]
The Commodity Futures Trading Commission (CFTC) has ramped up Wall Street regulatory enforcement in 2012. The CFTC released its Enforcement Division’s annual results on October 5, 2012, stating that it imposed more than $585 million in sanctions in fiscal year 2012. Only $450 million in sanctions were imposed in fiscal year 2011. This increase is […]