The Catholic University of America

 

Unicorns in the Land of Securities Law

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Securities Law Faculty with
Former Commissioner Paredes

(L to R: Joe Brenner, Chief Council, SEC
Division of Enforcement, Adjunct Faculty,
Securities Law Program Faculty, David
Lipton
, Troy Paredes, Jeff Puretz '81,
Partner, Dechert LLP, Adjunct Securities
Law Faculty
)

 

 

The Catholic University of America Columbus School of Law’s Securities Law Program presented the first installment in the 2017 Fall Lecture Series on the evening of September 19. Director of the Securities Law Program and CUA Law Professor David Lipton introduced speaker Troy A. Paredes to the audience of students, alumni, and faculty. Paredes is a former Commissioner of the SEC and currently the CEO and founder of Paredes Strategies LLC, a financial regulation advisory group.

The former Commissioner explained that in the commercial corporate world exist more than 200 businesses, which have reached $1 billion size without the benefit of a public offering of securities. These firms have become to be known as “Unicorns.” The term reflects the uniqueness of the financing of such companies. Historically, most developing firms which reached that size, because of investor purchases of ownership, have done it through a public sale of securities. Not so with Unicorns. 
 

The primary questions, which the Commissioner discussed, were how did such companies become financed and why did they choose to avoid a public offering. Paredes explained that these firms elected to raise capital through private placements. In doing so, they avoided the need to collect and disseminate a great deal of internal private information, which the firms would otherwise have to share in public documents to gain such wealth. Some of the better-known Unicorns are firms such as Uber, Airbnb, Pinterest, Dropbox, and Spotify.

Ultimately the question that the Commissioner Paredes explored is whether, in the balance, Unicorns spend more in raising private funds than they would in gathering the information they would have to disclose. As a practical matter, the former Commissioner argued that many firms elect to remain private so that management does not have to be told by the Commission what information they have to share with the public.