Volume 2 / Number 1 / Summer 1998

This page contains the abstracts, as well as links to the complete document on Westlaw.com, for the Articles of the Summer 1998 Issue, which was dedicated to the annual business law forum.

Introduction

Articles

Angels on the Internet: The Elusive Promise of “Technological Disintermediation” for Unregistered Offerings of Securities
Donald C. Langevoort
Westlaw
This Article considers the social, economic and legal issues relating to efforts by small business issuers to tap sources of capital on the Internet through an unregulated, private offering of securities.

Gatekeepers and the Internet: Rethinking the Regulation of Small Business Capital Formation
Stephen J. Choi
Westlaw
This Article argues that reduced communications costs through the Internet will both make it more difficult for countries to impose mandatory securities regulatory regimes and increase the value of regulatory competition. Private sources of investor protection, including third party certifiers of information, will flourish over the Internet.

Can Internet Offerings Bridge the Small Business Capital Barrier?
Jill E. Fisch
Westlaw
This Article explores the use and potential effects of small business Internet securities offerings in light of recent regulatory reforms that facilitate such offerings. In particular, the Article warns that small businesses may sacrifice valuable managerial and monitoring resources by foregoing traditional financing sources in favor of using the Internet to access the public equity markets.

Information Asymmetry, the Internet, and Securities Offerings
Bernard S. Black
Westlaw
This Article raises doubts about whether the Internet, as a new communications medium, will significantly reduce the cost of obtaining capital through a public or quasi-public offering.

Initial Public Offerings by Development Stage Companies
Christopher B. Barry and L. Adel Turki
Westlaw
This Article discusses the performance of two samples of companies that go public at a development stage: a sample of biotechnology companies and a sample of self-identified development stage companies from a wide range of industries. The Article concludes that development stage IPOs may be most suitable for well-diversified portfolios.

Understanding the Choice Between Public and Private Equity Financing of Early Stage Companies: A Comment on Barry and Turki
Ronald J. Gilson
Westlaw
This Comment considers Barry and Turki’s data indicating that investments perform differently depending on whether innovation is financed by private or public equity investment. The Comment posits two hypotheses for this disparate performance, the first highlighting ex ante differences, arguing where financing choices separate good prospects from bad, and the second focusing on ex post differences in performance resulting from differences in governance structure and incentives investment structure.

Venture Capital Contracting in the Information Age
D. Gordon Smith
Westlaw
This Article describes the market for reputation among the venture capitalists and examines the effect of the World Wide Web on that market. In particular, this Article suggests that the increased accessibility of information about venture capital firms will improve the efficiency of the market for reputation, thus enhancing the ability of entrepreneurs to reduce the risks of moral hazard and adverse selection.

The Small Firm Financing Problem: Private Information and Public Policy
Curtis J. Milhaupt
Westlaw
This Essay examines the information asymmetries that create frictions in financing transactions between entrepreneurs and investors, and analyzes existing small business financing programs from an information-based perspective.

Small Business Loan Pools: Testing the Waters
Amy C. Bushaw
Westlaw
Banks have traditionally played a significant role in financing small businesses, but this role is changing. This Article gauges the potential of loan pools to improve access to small business credit.

Love and Money: An Affinity-Based Model for the Regulation of Capital Formation by Small Businesses
Theresa A. Gabaldon
Westlaw
This Article proposes that both trust and trustworthiness might be rewarded by exacting, as the price of exemption from registration under the Securities Act of 1933 Rule 504 and 505, a legally enforceable stipulation that the promoters are assuming the strictest of fiduciary duties with respect to each of the investors in relation to the formation, conduct, and dissolution of a business.