
Private Company Lies
Rule 10b-5, the federal antifraud catch-all, applies to both public and private company securities. Yet the voluminous case law, and the related scholarly literature, has focused primarily on public corporations and markets.
This state of the world sufficed for a time. Most corporations of significant size had publicly-traded stock and faced the threat of securities class actions. By contrast, private corporations generally issued stock through private placements to sophisticated investors, and there was little secondary trading in their stock. Startups typically were acquired or went public within a few years, and valuations did not surpass, or even approach, the … Read more